Mortgage Mortgage

You've heard the news reports that foreclosure rates are on the rise. The nation is stuck between recession and recovery, the jobs of airline workers and teachers are threatened and years of zero-payment loans are becoming due. This is producing an increasing number of Americans who have encumbered their homes beyond their current incomes. The first signs of trouble may be the Notice of Default lists that are published in newspapers and obtained by title companies. But when is a NOD a pending foreclosure and how can you help?

The Notice of Default is the signal for a challenged homeowner. It's a report of who is more than 90-days delinquent on their mortgage payments. Some of these borrowers can solve their default dilemmas. But many are over burdened and need either a new start or a new home. Approaching a client who is in default is tricky. Unscrupulous lawyers and Realtors looking to cash in on the equity remaining on their homes will have harangued them from the minute that the notice is filed.

You do have an edge if you have been a faithful farmer. By keeping your name in front of those on your farm, your approach can be something other than an ultimatum. You can offer refinance terms that may allow the client to keep his or her home or you can offer to assist in the relocation of the client. Your reputation as a real estate leader in the community should afford you a welcome entrance and an attentive if not weary audience. Be mindful that before promising a way out, you must fully ascertain the value of the property and the amount of the delinquency. Remember that the loan- to-value question has never been more important than it is here.

When a client goes into default, they are automatically graded as a "C" borrower. This means that they cannot refinance if their LTV is higher than 70% including fees. In some cases that LTV may be 65% or even 60%. Also, when they refinance, their payments must be lower. While they can pay off some debt in the refinance, keep in mind that their interest rate probably will be higher. Additionally, remember that if they sell the home with the intent of buying a new one, their LTV on the purchase cannot be greater than 70%. The client is still graded as a "C" borrower. As difficult as meeting the LTV and interest rate challenges are, there is nothing worse than promising to assist a challenged borrower and not being able to deliver. Once you have discovered the best way to help your client, you must contact the lender and inform them of your intentions. You will probably need forbearance from the lender