Examples of Foreclosure Scenarios
Wednesday, April 29, 2009 at 10:17AM It is important to evaluate from the beginning the strength of your foreclosure options. Let's look at two examples, based on real cases I've worked on.
Scenario 1 - Poor Defensive Options. In this scenario, the homeowner has a first mortgage of $150,000, and a second mortgage of $30,000. The first has a fixed rate of 6.5%, and the second has an adjustable rate at 5.25%. This homeowner is in pre-foreclosure (that is, she hasn't stopped paying yet and no complaint has been filed). Her monthly mortgage payments including PMI are $1,100. She and her husband are both on fixed-income disability, and according to the financial paperwork she completed for me, cannot even meet their fixed expenses exclusive of the mortgage. That is, she can afford to pay $0 toward her mortgage. The home, according to Zillow, is worth $180,000 -- the same as the total of the two mortgages. Furthermore, she owes $40,000 in credit card debt (I don't make this stuff up, folks). Neither mortgage company filed their documents in public record. The homeowner's copy of the note and mortgage are unsigned.
Scenario 2 - Good Defensive Options. My second homeowner refinanced in 2006 into a two-year interest-only balloon mortgage of $280,000. In 2008, she entered into a modification with the mortgage company for a 30-year ARM. In February 2008, the ARM reset to 8% and she stopped paying. According to Zillow, her property is worth $180,000. She in in foreclosure (the complaint has been filed). The (new) mortgage company has lost her note and the property description was wrong - both issues are addressed in the complaint.
Analysis. Check back for the analysis!
Reader Comments (1)
Great article.