It was announced in the Arizona Daily Star this week that Arizona is one of four states (others are California, Nevada, and Florida) with the biggest percentage of foreclosures. The foreclosure rate last year in Arizona was double the level in 2006, and is reaching epidemic proportions. Each day as more Tucsonans fall into a possible foreclosure situation, I thought it would be beneficial to look at some steps that people can take to try to stay in their homes.
It is important that the Tucson homeowner face the issue head on, and prepare for days and weeks of making phone calls, and working tenaciously to correspond with companies and people who may be able to help you save your home from the painful personal and financial affects of foreclosure. Don’t automatically assume it is too late to act. As long as you are still residing in your home, you probably have a decent opportunity to be able to keep your home. People facing foreclosure have more avenues to pursue than they might initally realize. There are definitely more options than the 'pay what you owe or lose the home' notices that many people believe is their only choice.
A few potential solutions for Tucson homeowners in trouble include:
1) Negotiating a modification of the loan. You can work directly with your lender to attempt to get the terms and interest rate of loan renegotiated, to have a payment that is doable for you.
2) Refinancing the loan. This may be tricky- especially if your credit has been tarnished in the process. However, there are debt reorganization companies that can help work with you to accomplish this.
3) Listing your home with a Realtor for a possible “short sale.” Make sure that your Realtor is skilled in the short sale process, and can work with your lender to try and negotiate a price that will be acceptable to them.
4) Filing for bankruptcy. You will need to retain the services of a qualified attorney to do this, and it will cost you some money. Then you will most likely end up walking away from your debt obligations. I had a client who did this a few years ago, but was still unable to avoid the foreclosure.
A Short sale may be one of your best options to avoid foreclosure and save your credit from the dire affects a foreclosure can have on one's credit score. A short sale is a sale in which the lender agrees to take less than what is owed on the home. This is done by the lender agreeing to write off a portion of their loss. The benefit to the lender is that they can avoid the possible costly expense of a foreclosure. Short sales are typically negotiated by Realtors who are skilled in this area. This will help take pressure off the homeowner, so that they can possibly stay in the home longer. Many professional Tucson Realtors are adept at working short sales. Additionally, there are many buyers who are looking specifically for bargain priced homes. As a caveat, the the process of a short sale can be slow and frustrating, and they have been known to take up to nine months to close. For this reason, many of them end up falling out of escrow, and only about 30% of the short sales negotiated with a buyer actually end up closing.
The problem is that most banks are not moving fast enough to agree to the terms of a short sale. They are sitting on decent offers- thinking that the house could possibly fetch more money. In many cases, given market conditions- this is at best wishful thinking. The banks are not considering that foreclosure will cost them a great deal more in lost time and money in the long run. Although short sales are difficult to navigate, they can be done. They may be one of the best possibilities to currently help troubled homeowners avoid foreclosure.
This just in from Washington- "The National Association of Realtors (NAR) is working hard to ensure that the new Obama administration and Congress will have a "Troubled Asset Relief Program" initiative (TARP) or an additional economic stimulus package. This initiative will include provisions to stimulate home sales, prevent further foreclosures, and restore confidence in the housing market. NAR will continue its push in this direction for a comprehensive housing strategy. “The housing sector is at the core of the current economic crisis,” NAR President Charles McMillan said. “A renewed, revitalized and robust housing market is essential to generating commerce and helping families build wealth and stability. We are eager to see this happen and look forward to working with the Obama administration and Congress to quickly implement housing stimulus efforts.”
NAR is also working to ensure that any stimulus legislation reinstates the higher 2008 mortgage loan limits for FHA, Fannie Mae and Freddie Mac. These actions will have a significant impact on the housing market and will help protect home values,” McMillan said. NAR’s Housing Stimulus Plan includes both legislative and regulatory fixes. Its focus includes keeping mortgage interest rates low, boosting buyer confidence, and reducing the current foreclosure rate. It also asks that regulators be encouraged to help financial institutions resolve problems in the short sale process, make it easier for servicers to modify existing loans, remove unreasonable underwriting guidelines, and insist that credit reporting agencies correct errors promptly. “We must all work together to stimulate and unclog the housing and financial system. Low interest rates, tax credits and higher loan limits will be effective only if people can get a loan."
Some more good news just in- Fannie Mae won't evict renters. Tenants of foreclosed homes can stay if the house is up to code. Fannie Mae recently stated that it would allow qualified renters to sign month-to-month leases and stay on in homes it forecloses on (while it markets the home for sale), without requiring the tenant to pay a security deposit, or pass a credit check or payment history. The new National REO Rental Policy is intended to limit the disruption to the lives of renters when their landlord is foreclosed on, and "bring a measure of stability to communities impacted by high foreclosure rates," said Fannie Mae Chief Operating Officer Michael Williams in a statement.
Freddie Mac is reportedly developing a similar policy. Fannie Mae's program applies only to renters, not the owner of the property or their immediate family, and it requires that homes meet state laws and local code requirements for a rental property. All types of single family properties are eligible for the program, including 2-4 unit properties, condos, co-ops, single family detached homes, and manufactured homes. Properties with loans insured by FHA will require approval from the Department of Housing and Urban Development (HUD). Rents will be set at market rates by reviewing comparable rents, or using "other relevant indicators," Fannie Mae said. Properties will be managed through a real estate broker or a property management company, which will coordinate any necessary property repairs and respond to possible property safety issues. After a foreclosure is complete, renters will be offered a "Cash for Keys" incentive payment to vacate the property, or have the option of signing a new month-to-month lease with Fannie Mae. In late November, Fannie Mae and Freddie Mac suspended the process of evicting about 16,000 troubled borrowers or selling their homes while they implemented a streamlined loan modification program intended to prevent foreclosures.
All of this is good news for Tucson homeowners, because fewer foreclosures in Tucson real estate will hopefully translate to a prevention of further erosion of home prices. Please feel free to call me directly if you have any questions buying or selling a home in Tucson, or about the Tucson real estate market in general.
Written by Sarah Ley,
BSBA, ABR, CRS, CNHSA
Realtor with Long Realty Company
Direct: (520) 404-0544
http://www.sarahley.longrealty.com/
sley@longrealty.com
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