On August 25, 2017 Hurricane Harvey hit Texas hard, wiping out 15,000+ homes and damaging some 150,000+ more. This caused a spike in delinquent housing payments, and now more than 40,000 mortgages are 90 or more days delinquent! The spike was not unexpected, but Houston foreclosure postings soared pre-Harvey according to the Houston Chronicle. Harvey just exasperated the problem.
In the storm’s aftermath, most mortgage servicers offered 90-day forbearances – especially those backed by Fannie and Freddie. Forbearance plans give the borrower a chance to catch their breath and regroup financially, but aren’t without their problems as I warned homeowners about in HELP: I accepted a forbearance and now I’m being foreclosed!
In the fourth quarter of 2017 less than 1,000 properties were posted for foreclosure in the greater Houston area. That’s roughly a third of pre-Harvey figures, but volume is rapidly increasing in 2018. There are over 900 properties posted for sale on March 6th, and foreclosing attorneys indicate we’ll begin to see significant increases in postings beginning with the April auction. Additionally, CoreLogic expects foreclosure postings to climb as high as 2,000 a month by the end of the year.
How REALTORS can help
Homeowners frequently don’t know where to turn or who they can trust. Unfortunately, all the government-sponsored programs like HAMP and HAFA have expired, although HARP might be an option if the borrower is current and (figuratively) underwater. So, it’s up to each mortgage servicer to offer programs to “help” homeowners. But make no mistake, they're only helping to serve their own interests. They are not required to offer any help, and there are plenty of drawbacks to homeowners as I explained in: HELP: I accepted a forbearance and now I’m being foreclosed!
As a real estate professional, you’re an expert at working with homeowners. But stopping a foreclosure and negotiating with a bank is difficult. Together, we can educate homeowners on their loss mitigation options and navigate them through their situation:
- Reinstate the loan – if funds are available to come current on payments, or he/she can borrow them, this is their best option. Reinstating puts the borrower back in the position they were in before falling behind, possibly without late fees or negative credit reporting.
- Loan Modification – if reinstating isn’t possible, and the bank is unwilling to work out a repayment plan, a loan modification may be the best choice. There is no law that says a servicer must modify a loan, but most will to avoid having to foreclose. Compiling the mountain of paperwork can be daunting for many homeowners, which contributes to an 8% approval rate. If help is needed, partnering with an experienced law firm gives borrowers the best chance of approval prior to foreclosure.
- Short Sale – if the house is no longer affordable or desirable, and there isn’t sufficient equity to pay off the mortgage, a short sale may be their best option to avoid foreclosure and a possible deficiency judgment against them. This is where you can help as a REALTOR. No short sale experience? No worries, we can help.
- Bankruptcy – if there are overwhelming debts in addition to the mortgage, bankruptcy may be the best option for relief. Partnering with a competent law firm proficient with both bankruptcy and other foreclosure relief services.
- Deed-in-lieu – if a homeowner is no longer interested in the property and doesn’t have the time, energy, or financial resources to invest in a short sale; relief may still be possible through a deed-in-lieu of foreclosure. This option minimizes the potential harm from just letting the property go to foreclosure.
- Foreclosure – for homeowners wiped out by Harvey, it might be tempting to just walk away, allowing the foreclosure. But doing so opens the homeowner up to a lawsuit for the deficiency incurred by the mortgage company; further adding insult to injury for the homeowner.
Those are the major options available to homeowners, but of course each situation is unique, and options should be carefully considered only after the individual’s situation is understood. If you’re passionate about helping homeowners in trouble like we are, we’d love to partner with you.
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