The U.S. Department of Housing and Urban Development (HUD) has many programs in place to offer government help to stop foreclosures. The HUD web site offers many tips and suggestions for home owners that find themselves in financial difficulty and impending foreclosure. The most important step is to have open communication with your lender.

The federal government has incentive programs in place for the lender to help avoid foreclosure. There is significant assistance available for those who communicate with their lender early in the foreclosure process. HUD also has approved foreclosure counselors who will offer individualized help.

A recent collaboration of HUD/Federal Housing Administration, the Department of Veteran Affairs, the Department of Labor and mortgage lenders have provided valuable information regarding government help to stop foreclosures. If you’re facing financial difficulties due to job loss, military service, or natural disasters, there are many programs providing government help to stop foreclosures. Contacting any one of these agencies is an important step in gathering information to help you keep your home.

Victims of a natural disaster have special government help to stop foreclosure that has been made available through the national government. If you were a victim of a national tragedy, such as the attacks of September 11, 2001, there may still be help available through the disaster relief plans the federal government has in place. Military families who are suffering financial hardship due to deployment or disabilities caused during active duty also qualify for special programs to help them keep their homes.

The most important step when looking for government help to stop foreclosures is to contact your lender. Lenders have the most up to date information on all the government programs available and can tell you if you qualify for any of them. Lenders have workout options that help you keep your home. These options work best if you’re only 1-2 payments behind, so contact your lender early. The farther behind you get, the fewer options there are.

Government help to stop foreclosures is available; you just have to act early to be able to benefit from most of these options.

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When finances aren’t working out, and people are forced to ask for help, (such as restructuring their home loan) it’s easy for them to feel bad, almost like a “second class citizen”. Because of their situation they often feel like they’re asking the bank to do them a great favor. While it’s easy to understand how someone can feel that way - it’s also one of the worst things they can do.

If the economy has ruined your cash flow, then it’s true you’re in a bad situation - but so is the lender. At this point it isn’t even how you got there that matters. It’s about fixing it (if it can be fixed). You both have a lot to gain, or a lot to lose, depending on how successful the two of you are at restructuring your mortgage.

So don’t feel like you’re asking for any great favors. The truth of the situation is, it’s in their best interest to help you. Once you truly understand this you’ll be able to negotiate more favorable terms for yourself. If you don’t understand it, you’ll be in a weaker position.

Step 2: Understand Why the Lender Should Help You

Do you believe knowledge is power? You will once you’ve read this section! What I’m about to reveal to you is what it would mean to the lender if they let you default on your mortgage.

For starters, someone has to handle the foreclosure process. Meaning someone has to be paid - which is an additional expense for the bank. But that’s only the beginning.

What usually happens next is they’re going to find a house that’s been trashed out by the people who had to leave. (Even if you’d never do that, it’s still a reality that happens all the time. Which means they need to factor that in to what it’s going to cost them - on average - when a home is foreclosed on and repossessed). But that’s not all.

Next, they’ll have to put it on the market and try to sell it. Bad, bad, bad. Seriously. Now they’ve got to spend time and money trying to sell it. They’re not realtors, and trust me, they don’t want to be either. But we’re still not though. It gets even worse.

With declining prices and home values, and the difficulties selling in these markets, your lender could be sitting on your home for months - who knows - maybe even years - until they’re able to sell it. All of which ties up their cash flow, which they can ill afford. (Especially in this economy).

Finally, consider this.

Who knows how many other accounts are sitting on their books about to foreclose? Multiply every problem above times however many other accounts are in the same position and you begin to realize their situation.

Step 3: Understand How to Use This Information

These are challenging times we’re going through. Remember, the purpose in using what you know isn’t to try to manipulate or blackmail the system. The truth is we’re all in this together. We need the lenders, and they need us. What we’re looking for is a fair and reasonable outcome for both parties.

So don’t be defensive or confrontational. Instead, use this information to prepare yourself. Use it to know how to respond when you’re negotiating rates and terms. Always be polite. But by no means go in there thinking you need to be apologetic. You’re trying to help both sides out of a difficult situation.

If you go into it with this kind of an attitude, I’m confident you’ll have great success.

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The overnight lending rate that the Federal Treasury charges banks for funds is the interest rate that the Federal Reserve Board continuously lowered until it ultimately rested at a rate of .25% by the first quarter of the year 2009. Once upon a time when this rate was lowered one could reliably wager that the thirty-year average mortgage rate would follow suit. It was logical that if a bank borrowed from the government at a lower rate, it could provide mortgage financing to borrowers at discounted rates. However, the mortgage rate is not quite so directly manipulated by the puppet strings of the Federal Reserve Board. Instead, the thirty-year mortgage rate is predominantly influenced by fluctuations in the ten-year Treasury bond rate. Because most thirty-year mortgages are paid off by borrowers during the first ten years of their loans, conservative securities investors choose between purchasing the relatively safe ten-year Treasury bond and the once slightly more risky mortgage-backed securities that consist of many thirty-year mortgages pooled together. It is this very competition between the price of Treasury bonds and mortgages on the securities markets that most impacts the thirty-year mortgage rate.

Although Treasury bonds typically provide a relatively low rate of return, they represent a very low-risk investment because they are backed by the United States Treasury. Mortgage-backed securities have generally produced a somewhat higher yield than treasury bonds, yet were considered to be narrowly riskier investments since they are secured by real estate. Consequently, the “spread” between Treasury bond and mortgage-backed security yields has historically been around .75%, with mortgage-backed securities representing the higher end of the spread due to the additional risk attributed to them.

When real estate values significantly declined from 2006 to 2008, the risk associated with purchasing and holding mortgage-backed securities became significantly enhanced. To counter this perception of increased risk, sellers of mortgage-backed securities were forced to offer mortgage-backed securities at higher yields so that they would continue to be attractive to investors. By the first quarter of 2009, the spread between Treasury bonds and thirty-year mortgages reached an unprecedented 3.00%. As a result, banks were forced to offer mortgages to borrowers at higher rates to compensate for the higher yields they had to provide to investors on the secondary loan and securities markets.

So despite all of the Federal Reserve Board’s efforts in reducing overnight lending rates to banks in 2008, thirty-year mortgage rates remained relatively unchanged by early 2009. The Federal Reserve had lost all ability to influence mortgage rates. In turn, this forced the federal government’s hand to look to other means of simulating the housing and financial industries, such as purchasing hundreds of billions of dollars worth of mortgage-backed securities from financial institutions itself. This extreme government action has often been labeled a “bank bailout” since the government reluctantly purchased “toxic assets” that investors were otherwise unwilling to purchase on the open securities market.

Whether the government’s investment in these securities amounts to a success or a failure still remains to be seen. If housing values once again appreciate before too many more borrowers default on their mortgages, the government may be able to sell these mortgage-backed securities for handsome returns to investors in the future. However, if increased foreclosures continue to flood the housing market with excessive supply, the federal government may eventually learn how great a price it actually paid for its investment. If these potential securities losses, coupled with further anticipated economic stimulus spending, ever amounted to an inability or unwillingness on the part of the federal government to meet its obligations, even Treasury bonds might begin to look like a risky proposition.

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Mortgage companies continue to foreclose on American homes at an alarming rate. The real estate market boomed in the late 1990’s and early 2000’s. Property values appreciated at an unprecedented rate and homeowners cashed in on their new found home equity. At the same time, a variety of “creative” mortgage options became available, options mortgage lenders said would allow people who might otherwise not have qualified for home financing to become homeowners.

Now, interest rates have climbed, and the real estate market has cooled. Homeowners with adjustable rate mortgages (ARMs) and interest-only loans are reaching the “shock point” and seeing payments increase dramatically, but prepayment penalties, rising interest rates, and declining home values make refinancing difficult-especially since these “creative” mortgage options have left most borrowers with little or no equity.

What is Mortgage Foreclosure?

Foreclosure, in simplest terms, is the process by which the bank or mortgage company that has a lien on a piece of real property takes that property back because the borrower / property owner hasn’t complied with the terms of the mortgage agreement. Most often, this is because the borrower has fallen behind on payments.

The exact foreclosure process differs somewhat from state to state, but the real problems usually begin when mortgage payments are 16 days past due. Although it is still possible to work out a repayment plan with the lender at that point, many homeowners do not. This may be because they’re still in the midst of the financial difficulties that caused the past-payment, or simply because they’re hoping things will get better with the next paycheck or the next month or some other change in circumstances.

Unfortunately, many people delay too long while hoping for things to get better. If a homeowner has significant equity (usually at least 15 - 25%) in the home and is less than 90 days past due, there may be a variety of possible ways to stop foreclosure, including refinancing. However, once a loan is more than 90 days past due, or if the homeowner doesn’t have significant equity-which is often the case due to creative financing options-refinancing can be difficult. In those cases, Chapter 13 bankruptcy may still allow the homeowner to stop foreclosure.

How Can Chapter 13 Bankruptcy Stop Foreclosure?

Many people file for Chapter 13 bankruptcy specifically to stop foreclosure. In most cases, an automatic stay is entered as soon as a Chapter 13 bankruptcy petition is filed. The automatic stay will temporarily stop foreclosure, along with all other collection action, regardless of the stage of the foreclosure proceedings. With the automatic stay in place, the debtor and his attorney have the breathing room to work out a Chapter 13 repayment plan.

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Regardless of which types of loan programs you may be eligible for, it’s important to know what not to do before beginning the process of applying for a mortgage. In order to significantly increase your chances of qualifying for a lower interest rate and more favorable loan terms, you’ll want to avoid making the following 5 most common blunders:

1.    Running up credit card balances
Having a lot of debt increases your debt to income ratio. This is a key factor that lenders use to determine how much debt you can comfortably manage. Before you apply for a home loan, make sure that your credit card balances are low. Refrain from using your credit to make purchases if you need to acquire a home loan. If your credit card balances are already high, start paying down the balances and keep them low.
 
2.    Financing major purchases before applying for a home loan
Countless people inevitably ‘kill the deal’ by purchasing a car or taking out a big loan from a finance company or their credit union right before they apply for a home loan. Similar to running up credit card debt, this additional debt can make the difference between getting approved or denied. If at all possible, wait until after your home loan has funded before financing other purchases. Believe it or not, many lenders will run your credit again even after they have approved your loan to find out if you have since applied for more credit. If you are purchasing a home, you will want to wait until the day that your loan has actually closed.  If you are refinancing a primary residence, there is a 3-day rescission (cancellation) period, even after you have signed the loan papers before your loan has funded.
 
3.   Waiting until the last minute to obtain financing
Many homeowners with an adjustable rate mortgage start to inquire about refinancing only 2 to 3 months before their initial rate expires, but by then it’s often too late. Because the criteria to qualify for all types of mortgages have become more strict; if you have a loan with a high interest rate or payments that are scheduled to reset in the next 1-3 years, you’ll want to start getting prepared now. Unfortunately, many people who have had their homes foreclosed on or are now facing foreclosure could have qualified for a more stable and affordable loan program had they taken the time to get better prepared ahead of time.
 
4.   Paying off old collections and charge offs
Many people who have re-established their credit often have some old bad debt (2-5 years old) that still shows up on their credit report. In most cases, paying off an old bad debt is a bad idea. It causes the account to reset and become current which more adversely affects your credit score.  For homeowners who obtained a subprime loan, you’ll want to learn how to effectively manage your credit well in advance of applying for a home loan to qualify for financing.  If you’re looking to purchase a home in the future, start educating yourself about what is required to obtain financing at least a year before you need a loan.
 
5.  Signing up with credit counseling agencies
Many debt management services advise people to do just the opposite of what they should do in order to qualify for home financing such as closing out accounts in good standing. But these actions often cause their clients credit scores to decline. Since having a higher credit score is very important, especially in today’s market, you want to make sure not to engage in practices that will bring your score down. Also, many lenders don’t look favorably at borrowers who have signed up with these services. It says that you are having trouble managing your finances which is a red flag to lenders. If you’re tempted to use your credit cards, a better strategy would be to cut them up and pay down your balances so that you incur low or no monthly charges, but keep your accounts open and continue to make timely payments if any.

Keep in mind that some credit card companies are closing out accounts that have been inactive over a long period of time. You can always order a replacement card later after you have secured your home loan and payoff minimal charges that you make in full each month to keep preferred accounts open and active.

(Please note that in certain circumstances, you may be required to register in a HUD-certified consumer debt counseling program in order to qualify for special financing under the Homeowner Stability Initiative), otherwise, steer clear of these types of services  while you are seeking a home loan.
 
Understanding the home financing process and how to manage your credit well before obtaining a mortgage will ensure you get the best and safest terms as well as avoid the common mistakes that can cause your loan to be denied. 

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Never assume that you have accurate information. I cannot even begin to tell you the number of times that I thought I understood what my mortgage company needed from me to stop house foreclosure only to realize later that what I thought they needed was wrong. I learned to call and verify that I had the right information. This is especially important when you are dealing with things like agreements that they need you to sign or money that you need to send them.

And speaking of agreements, if you want to stop house foreclosure, make sure that any agreements that they need you to sign are completed on time and in full. I had two different agreements that I had to send to the mortgage company while I was getting my house out of foreclosure. I made sure to keep a copy of the airbill so I could track the package and make sure it got there. I also called the day after it arrived to make sure that they received it and that it was complete to their satisfaction. Again, never assume anything, always verify.

Keeping track of any money that you send the mortgage company is also important to help you stop house foreclosure. While my house was in foreclosure, my mortgage company did not accept personal checks. Everything had to be in the form of a cashier’s check, a particular bill collection service, or a bank wire. Be sure that you understand what forms of payment your mortgage company will accept under whatever agreement you work out with them. Always keep information about the money you sent them, when you sent it and how you sent it. This information proved vital to me on more than one occasion. And again, always call to verify that your mortgage company received the payment and that they received it in a format that is acceptable to them.

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Hardship Reason #1: A Job Loss Put You Behind on Your Payments

Many people, through no fault of their own, have been losing jobs. It’s obvious to everyone that losing a job can impact that persons ability to pay. Unfortunately, most of us don’t have an emergency fund which can cover 3-6 months of living expenses. In fact, most experience problems within 30 days of an interruption in cash flow.

Hardship Reason #2: Reduced Income on the Job

This reason is similar to the first one. Maybe you didn’t lose your job, but your income has been reduced through a cut back in hours or production. Again, changes in the world economy is having "ripple waves" across a broad range of industries.

Hardship Reason #3: Divorce

Have you heard about the increase in couples who have put off getting a divorce because of it’s economic impact? If you’ve recently gone through a divorce you know from experience the effect that’s having on your finances. Your lenders know it too. They see it all the time.

Hardship Reason #4: Medical Emergencies

The cost of health care has probably wiped out more peoples life savings than any other single cause. And it can happen no matter what the economy is doing.

Hardship Reason #5: A Death in the Family

Obviously when a wage earner dies it will impact household finances. (Hopefully you’re prepared for that possibility with adequate life insurance).

Hardship Reason #6: A Huge Sudden Jump In Your Monthly Payment When An Adjustable Rate Mortgage (ARM) Increases

There’s a lot of finger pointing going on in Washington over this one. Doesn’t matter. If you’re caught in this situation it can make you eligible for assistance. Enough said.

Hardship Reason #7: Any Combination of Circumstances or Temporary Setbacks That Have Caused You To Fall Behind

One thing everyone understands — "life happens". The key here is to be able to demonstrate that even though you’ve fallen behind on your mortgage it was caused by temporary events which have now been overcome or solved.

In Closing …

I hope the information you’ve found in this article has helped you to assess where you stand, and given you ideas on how to address your situation. As Americans we can get through this together. We have to. Remember - you can do it. And you’re not alone.

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How is it beneficial for bad credit borrowers?

Persons with default in their past credit behavior, CCJs, arrears, late payments are tagged as the bad credit borrowers. It means that their credibility is not up to the mark. Lenders hesitate to lend the bad credit borrowers due to their susceptible credit history. But, in case of remortgage, the risk of the lender is reduced. As the borrower pledges his/her home against the loan amount, the lender becomes lenient towards the rough patches in the credit status. There is also a reduction in the payable rate of interest. The most beneficial part of bad credit remortgage is the opportunity to improve the credit status of the borrower. As the newly raised loan is secured in nature, the monthly outgoing becomes affordable for the borrower. So, he/she can easily maintain regularity in repayment. Evey timely-paid installment adds to the improvement of the credit status of the borrower. Once, the credit status becomes up-to-mark, the borrower can raise fresh loans at lower rate of interest and other friendly terms and condition.

What is the borrowing limit under remortgage?

The maximum amount you can borrow depends upon factors like the current market value of the property, the amount of loans against it and your capability of repayment. If you have a sound repayment capacity the lenders can offer up to 80% of the increased equity of your property.

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Unfortunately, a commercial real estate loan is much less liquid than a home loan. Suppose you are a bank with a lot of housing loans on their books. Suddenly there is a run on the bank. No problem. You simply ship in a bunch of files from home loans to Fannie Mae and sold at par (or better). Almost instantly you have access to your cash and your bank can meet the run.

But there is no organized secondary market for commercial real estate loan. In sharp contrast to a residential real estate Commercial Mortgage loans, all commercial real estate loan is different. The property is different. A property can be a strip center, and the other could be a self-storage facility. Each property has a different quality of the tenant. The strip center could have a AAA rating in the chain of bookstores as a tenant, whereas the ministorage could have a collection of moms and persistent organic pollutants as tenants.

But perhaps that Amazon.com is promoting the chain bookstores out of business. Arguably, a collection of small mom and persistent organic pollutants is a secure tenant mix. On the other hand, Standard and Poor’s only one type of business obligations as a AAA-quality investment if the company is very b financially. Standard and Poor’s, however, has been wrong from time to time in the past, so you really know? Therefore, it is the subjective nature of the commercial real estate loan that makes commercial real estate loans in a manner much less liquid. You can not reduce a commercial real estate loan to a single universally acceptable score.

Obviously, the less liquid investment, the higher the yield an investor demand. Therefore commercial real estate loan rates tends to be higher than residential real estate loan rates. If you are comparing an “A” quality commercial real estate loan to an “A” quality of residential real estate lending, commercial real estate lending usually have an interest rate that is about 50 points Commodities (half percent) higher.
Therefore, if the Canada country financial is a conventional appointment, 30 years, residential real estate loan rate of 6.0%, it is expected that the big banks and conduits is cited as the institutional, commercial real estate rates loan of about 6.50% to a typical 25/10. It is not an exact correlation, but you’ll find that in practice the golden rule is usually very close.

Smaller banks, the smaller, less elegant trade agreements, usually citing commercial real estate around the 0.875% loan rates higher than the conventional 30 years, residential real estate loan rate (also known as the “prime residential rate “). In this example, when the first residential rate is 6.0%, you can expect a small bank to quote around 6875% for a loan of $ 450,000 in a small office building. The term could be a 25 / 7 or 25/10. Again, this 0875% over the first residential rate is not an exact correlation, but you are in the range of noise.

Hard money commercial real estate loan rates are typically around 3.5% to 4.5% in prime, scheduled for one to five years. Most hard money commercial real estate loans require only interest payments only. The typical loan rate today for a hard money commercial real estate lending is about 3 points by http://www.pro-bargainhunter.com.

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-Refinancing FAQ & Advice
-M Petrone

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