Reviewing fiscal summaries emanating from Sacramento and Washington, D.C., one would think that both state and federal coffers are overflowing with money. For the most part, they are. As it happens, it is your tax money contributing to this political euphoria. Business and payroll reports show that wages and taxes collected are up. Dramatic increases in stock prices afford people the opportunity to enhance their net worth. With all this good news, why does the third quarter report from the Mortgage Bankers Association show an increase in residential delinquency rates? Every category of loan, conventional, FHA and VA, had higher delinquencies than the same quarter last year. This year California, despite economic improvement and increasing real estate values, is poised for an 8% increase in foreclosures. Lenders will foreclose on approximately 100,000 properties in the state in 1997. That number translates into a combined mortgage value of $13.1 billion of residential, multifamily and commercial property. There are, however, pockets of good news where rates of foreclosures have declined. Today, with increasing real estate prices, many lenders are not afraid to foreclose. They know that they can turn the properties around in a shorter marketing period compared to two or three years ago. There is also added pressure from many investors, FannieMae included, to initiate foreclosure proceedings quickly
During the past two weeks, I received two telephone calls from individuals who were in foreclosure. I met with one party and spoke with the other on the phone. When I speak with people in this situation, I ask where they are in the foreclosure process. Lenders, through the trustees, file a Notice of Default and after ninety days of such filing can file a Notice of Sale for a trustee's sale not sooner than 20 days after recording the Notice of Sale. Interestingly, each of these people was just days from losing her property by trustee sale. The obvious question is, "why did you wait so long before you got help?" This seems to be the situation with most people in this dilemma. They think that a miracle or some material change will take place that can bring payments current. Unfortunately, for many this doesn't happen. Their homes, their retirement nest eggs, (this being the case for both people since they had substantial equity) will be taken away from them due to lack of action.
Many situations arise, resulting in our getting behind on payments. Illness, loss of job, divorce, death in the family and other unforeseen events can take place that put us in a hole. We know it is very easy to hide our heads in the sand and pretend that this too will pass. Unfortunately, this situation does not pass and every day that goes by, the consequences and the costs of doing nothing mount. Payments missed, the beneficiary (lender) turns the account over to the trustee to initiate foreclosure proceedings against the trustor (borrower/homeowner) and the clock starts running on a number of legal fees. These fees and the past due payments must be brought current to stop the trustee sale clock. Before it gets to this point, you can do something.
If you know you are having difficulty making your payment, contact your lender. I know many readers will tell me that this has been tried and no one will listen. You're right. Many people will not listen. You must get the ear of the right person. People in customer service are trained to say one word . . . no! Obviously, they are not the right people with whom to speak. Go beyond them. Get the name of the Vice President who has the authority to develop a workout plan for you. Do not communicate on the phone. Deal with your lender in writing only! If you had the opportunity to call, you may have noticed a recording warning you that anything you say may be used to collect the debt owing. Furthermore, your thoughts will be clearer on paper. You will also have a written record of any commitments between you and your lender. Maintain a record of all communication. Use registered mail and/or a fax machine. A fax activity report showing the receiving telephone number of your lender will verify that letters were delivered. Do not wait until the last minute to develop a plan of action. The lender of one of the above parties told me that workout forms sent to the borrower were never returned. She never communicated with them. They were ready to work with her. The loan on her property was purchased by Freddie Mac. Freddie Mac, I was told, has instructed lenders to work with borrowers.
If you find yourself dealing with a lender that is not cooperative, keep your records. If the only remedy available to you is filing for bankruptcy, you will at least have in writing the steps you have taken to rectify the situation. Lenders, for the most part, lose money when they take back a home. They are not in the real estate business. They are in the lending business but they do want to get repaid and repaid on time. Solutions can be found when problems arise, if there is mutual communication.
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