Are Your Odds of Avoiding Foreclosure About to Change?
While everyone’s focusing so intently on the new foreclosure relief bill, there are mortgage industry changes that could affect many more homeowners in default than this legislation.
If you’ve been struggling to keep up with your mortgage payments and fighting with your lender to try to avoid foreclosure, you might start to feel that your situation is hopeless. Then one day, you get a notice in the mail that your loan has been “sold” or “transferred” to a new mortgage company.
Sometimes your odds of success improve by doing nothing at all. I’ve spoken to lots of homeowners who’d like nothing more than to “change lenders.” With lots of new players in the mortgage space, there’s a chance that a good number of homeowners will get a new lender without needing to refinance.
There’s good news and bad news:
First, the good news:
If your loan gets transferred to another servicer, there’s a chance that it’s been purchased by a new investor- at a substantially lower price. This raises the possibility that they’ll be more flexible than the lender you’ve been fighting… or avoiding. Because they’ve gotten your mortgage at a discount, they may be more creative in solving your problem, and you’ll be able to avoid forelosure after all.
Now, the bad news:
There is a possibility that they may be less flexible in working with you to stop foreclosure for precisely the same reason- they bought your loan at a discount!
How can this be? I’ll let one of these investors, Bill Gross, explain:
“In some cases the prices are now attractive enough to overcome the inevitable rising default rates. Some of the paper we see yields 10-15 percent under very onerous conditions. Even if 100 percent of the mortgages in a ‘pool’ default, the recovery value is probably 50 cents on the dollar or higher. Thus, if you’re buying paper at 50 that is backed by first mortgages, you are pretty well protected.”
For homeowners hoping to prevent foreclosure, the key words are the last two: “well protected.” What that means is that even if they have to take back quite a few homes through foreclosure, they’re still going to make money. Whereas your last lender couldn’t afford to work with you based on the numbers, your new lender might not feel like working with you, because taking your house through foreclosure makes more sense… based on the numbers.
What does this mean to the tormented homeowner who’s missed four payments and trying to avoid foreclosure? There’s a chance that you may be able to finally strike a deal, stop foreclosure and keep your home.
Your success with a new lender is rely on a combination of luck and skill. The luck part is out of your control… hopefully, you’ve ended up with a lender who’s interested in keeping homeowners in their home.
The skill part comes down to acting effectively. You’d better present yourself as a borrower who’s worth taking a chance on. You’d better prepare a very good package, you’d better talk to the right people in the organization, and you’d better not show them any signs that you might be a bad risk.
Let me speak plainly here: these guys are not getting into tbis business to save the world. They’re in it to make money- lots of it. So, best you approach them with that in mind. If fixing your loan gets in the way of them making money, they’ll steamroll you and take your home. The folks who are staffing these “kinder, gentler” mortgage servicers are the same folks that were kicking your ass at ASC, Wells Fargo, etc. It’s a revolving door!
So act accordingly.
It also helps if you’ve done this a time or two. Before you go to working on stopping foreclosure with your new lender, take a moment and get yourself some education.
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