As stated in an earlier blog, the first thing you may want to do is contact your existing mortgage company. Some mortgage companies are willing to work with those who have fallen behind on their payments and have defaulted on their loans.

Forbearance

Like a payment plan, forbearance is an agreement between you and the mortgage company that reinstates the delinquent loan through the payment of a lump sum of a schedule of payments over a period of time. If you are behind on your payment by $2,000, for example, the mortgage company may allow you to pay the money back through installment payments over six months. The mortgage company may decide, on the other hand, to allow you to pay a reduced monthly payment until you have an opportunity to get back on your feet and pay any remaining arrearages in one lump sum. Generally, these agreements will not exceed more than 12 months, but before you sign anything, consult with a lawyer or counselor.

Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is an alternative where you voluntarily give up the property title to the mortgage company. Generally, this is a last ditch effort to avoid the negative consequences of foreclosure. Here, you tell your mortgage company that they do not need to bother with the formalities of a foreclosure proceeding because you will simply turn over your title to the property rather than lose it. This is sometimes known as a “friendly foreclosure” because it is a mutual agreement between you and the mortgage company and is not forced upon you by use of the power of sale.

Short Sale

When the mortgage company agrees to do a short sale in real estate, it means they are accepting less than the total amount due. Not all mortgage companies will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales. A short sale means your mortgage company is accepting a discounted payoff to release an existing mortgage. Just because a property is listed with short sale terms does ot mean the mortgage company will accept your offer, even if you accept it.

Be aware that you need not be in default – to have stopped making mortgage payments – before a mortgage company will consider a short sale. A mortgage company may consider a short sale if you are current with your payments, but the value of the home has fallen. You may have over-encumbered (owe more than the home is worth) , so a discounted price might bring the price in line with market value, but will not bring the loan to a price below market value. A short sale negatively affects your credit, but it is not as bad as foreclosure.

This information was compiled by the University of San Francisco, School of law.

This weekly report is created by Dan Spano, broker of Paradise Real Estate located in the Stateline area of South Lake Tahoe, CA.  This information is focusing strictly on the South Lake Tahoe, CA. side of Lake Tahoe.

As of today, August 6,  2010 @ 3:00 pm:

Current active single family residential and condo listings for all of South Lake Tahoe, CA; 508.  69 of these active listings are bank-owned or short sales.

Homes sold from August 1,  2010 to August 6,  2010 are: 9. Of the 9 homes sold, 3 or 33% , are foreclosure (bank owned or short sales). During the  same time period last year 7 homes sold, of which 0 were foreclosure. Total homes sold year to date are 312, of which 157 or 50% are foreclosures.  Total homes sold for the same time period last year were 228, of which 87 or 38% were foreclosures.

There are a lot of great opportunities for buyers for both bank owned/short sales, as well as sellers that are competitive with the bank owned and short sale properties.

If you would like to search for current homes for sale please use this easy search tool for South Lake Tahoe, CA and NV real estate. There is also an option to get instant email notifications of brand new listings as they get posted by real estate agents in the South Lake Tahoe area.

Missing one or more mortgage payments means you are in default.

If you miss one or two payments, a mortgage company will usually contact you to demand payment and may offer to modify the loan. This is a good time to consult a counselor or lawyer and ask them to negotiate with the mortgage company.

Receiving a Notice of Default.

If you do nothing in response to the mortgage company’s attempts to contact you, or you cannot come to an agreement with them, the mortgage company generally sends a further notice advising that they are declaring a “default” of the loan obligations. The official notice is called the Notice of Default and is filed with the County Recorder’s Office by the trustee (usually a title company). A copy must be mailed to you. The Notice of Default must spell out the specific breach of contract. If you want to know whether a Notice of Default has been filed against your property, consult with the County Recorder in the County where the property is located. All interested parties must be served and notified of the foreclosure.

The filing of the Notice of Default begins the Reinstatement Waiting Period, which is 90 days. This is the time period that you get to cure the debt by paying off all overdue payments. (i.e. bringing the mortgage current).

Selling the property – Notice of Trustee’s Sale.

After the 90 day Reinstatement Waiting Period is up , the Trustee has the obligation to do a final check to see if the deficiency has been cleared. After this check, a Notice of Sale of the property can be issued and you must be served with this notice. The Notice of Sale must be published once per week for a period of at least 20 days. The Trustee is also obligated to post in a conspicuous place on the property and in at least one off-property place, a sign notifying the public of the upcoming sale. After the 20 day Publication Period is up, the auction for sale of the home can be held.

As stated earlier, the Trustee does not have to go to court to have the right to sell the property. The sale is an auction and the property is sold to the highest bidder. If anyone other than the beneficiary (mortgage company) purchases the property, they must have cash in hand.

The laws that govern California foreclosures are found in California Civil Code, Section 2924. To view these statutes on the web, you can visit: http://www.leginfo.ca.gov

If the property is foreclosed through the court system in a judicial foreclosure, there is a right of redemption period after foreclosure. However, foreclosures that are non-judicial have no period of redemption in California. Most foreclosures in California are non-judicial, so more often than not, once the sale of the defaulted property is complete, the sale is final.

California Foreclosure Timeline

After the Property is sold at the Foreclosure Sale.

Whoever owns your home, cannot just change the locks to the home. The new owner must serve you with a 3-day written notice to quit, and then must take you through the formal eviction process in order to get possession of the property. That process takes about 30-45 days.

If someone knocks on your door and tells you to get out, do not panic. No one has the right to simply tell you to leave without going through the formal eviction process. If you feel threatened or unsafe, do not answer your door, or call the police. The new owner must follow the formal legal process and evict you in order to have you leave.

Information compiled by University of San Francisco, School of Law.

Foreclosures can vary from state to state. The following information will help you to understand the California foreclosure process.

California is known as the Title Theory state where the mortgage company (i.e. bank) holds the title to the property while you live on the land and continue to make mortgage payments. The document that secures the title is usually called a “deed of trust” but may also be referred to as a mortgage. California has a complicated set of rules concerning foreclosures. The entire foreclosure process is described below.

How are mortgages in California foreclosed?

In general, foreclosure means that when you miss a payment or two , the bank sends an official notice that you are in the foreclosure process. Then you have a period of time to cure the deficiency. If you cannot do that, the mortgage company pursues foreclosure through either judicial or non-judicial means. An auction is then held and the property is sold to the highest bidder.

The primary method of foreclosure in California involves what is known as non-judicial foreclosure. This type of foreclosure does not involve court action. When the deed of the trust/mortgage is initially signed, it will usually contain a provision called a power of sale clause. This allows the trustee (usually a title company) to sell the property to satisfy the defaulted loan. The trustee acts as a representative of the mortgage company to sell the property, which typically occurs in the form of an auction.

California has a requirement known as the one action rule. If a foreclosure is completed by non-judicial means (outside of court), then the mortgage company cannot pursue a second action against you if the auction proceeds do not meet the amount due on the property.

If a foreclosure is judicial, the house may be sold and a separate judgment may be obtained against you for the remaining balance due on the loan (up to the full amount of the loan plus foreclosure costs) if the auction proceeds do not meet the balance due on the property.

Most loans are foreclosed upon using non-judicial foreclosure, but a mortgage company has the option of using judicial foreclosure. Since this process takes longer than non-judicial foreclosure, it is rarely used. In California non-judicial remedies have stringent notice requirements and the mortgage document are required to contain the power of sale language in order to use this type of foreclosure method.

Information compiled by The University of San Francisco School of Law

Finding a new home. Bad credit. Surprise tax bills. If you’re facing foreclosure, brace yourself for some difficult situations. Here’s some smart advice to help you deal with each one.

These days, record-breaking foreclosure statistics are coming out with numbing frequency. But what happens to the thousands of families after their personal financial disaster is added to the mounting national count?

Unfortunately, once a foreclosure is final, the financial and emotional upheaval is far from over.

While there’s considerable pain, most foreclosure victims will eventually become homeowners again, says Jay Zagorsky, a research scientist at Ohio State University.

Still, that won’t happen any time soon, especially since mortgage rule maker Fannie Mae has recently lengthened the time that must lapse between a foreclosure and approval for a new mortgage.

Here’s a look at the issues foreclosed families grapple with and some smart solutions.

1. Finding a new home
The immediate problem is obvious: where and how to find a new place to live.

Lack of cash for a rental deposit is probably the biggest barrier to foreclosed owners getting re-established on their own. Landlords will sometimes accept tenants who have a credit score of just 580, says Maurice Ortiz, marketing director at The Apartment People in Chicago.

But if landlords look beyond a numerical score to credit records, a foreclosure may spook them, since it indicates the potential tenant hasn’t paid his housing bills, Ortiz adds. If the foreclosure can be explained, however, and if the rental candidate has a solid job history, he may be accepted.

Moreover, “if you’re on the edge, you may have to double your deposit,” says Mark Fogelman, president of Memphis-based Fogelman Management Group.

Scraping together a rental deposit isn’t easy for cash-strapped foreclosed owners.

“That’s why I recommend that people try to make plans as soon as they think foreclosure (is inevitable),” says Patricia Lynch, a corporate trainer with ClearPoint Financial Solutions in Richmond, Va. Anyone who has an FHA-insured loan who’s being foreclosed on should investigate the “cash for keys” program, whereby they get a check for up to $1,000 if they voluntarily vacate their home and leave it “broom clean,” Lynch says.

2. Suffering through the credit fallout
Once owners default on their mortgages, other creditors consider it much more likely they won’t collect what they’re owed either.

“Credit cards have a ‘default’ rate, and (foreclosed owners) could see their interest rate jump to very high levels — as much as 30 percent,” says John Ulzheimer, president of consumer education for Credit.com. “You’ll also have a hard time getting a decent car loan,” he adds.

If a foreclosure is an isolated event on an otherwise good credit record, consumers may be able to rehabilitate their records and garner better loans and card rates in 24 months, Ulzheimer says.

But since a foreclosure is rarely the former owner’s only credit slip-up and foreclosures are often combined with the fallout of punishing rates, some former homeowners will never climb back up to a good credit score, Ulzheimer says.

3. Buying another home of one’s own
Fannie Mae has just increased the length of time it takes from the completion of a foreclosure sale until the borrower can get a new mortgage from four years to five years.

The extra year is designed to deter what Fannie Mae believes are borrowers who have made reckless debt decisions. But foreclosed owners who can explain that extenuating circumstances — typically situations beyond someone’s control, such as a job loss — are the impetus for the foreclosure must wait only three years.

Perhaps the best option for obtaining a mortgage after foreclosure is with a federally insured FHA loan, says Jerry DuPaw Jr., a mortgage loan officer in McHenry, Ill.

The minimum time between the completion of foreclosure until when you can be approved for an FHA loan is three years — whether or not there are extenuating circumstances. Still, FHA borrowers will have to show that they’ve been practicing good bill-paying habits since the foreclosure.

4. Owing a potential employer an explanation
Should you lose your job as well as your home, your new job hunt shouldn’t be hindered by the subject of your foreclosure coming up in job interviews — unless you’re applying for a job in which you handle money.

“We recommend that employers do credit checks when they are concerned about how financially responsible someone is — which may be for any money-related position from a cashier to an accountant,” says Robin Throckmorton, a human-resources consultant in Loveland, Ohio.

The federal Fair Credit Reporting Act has rules employers must follow, such as notifying the applicant of the credit check, and most companies limit checks so as not to run afoul of the law.

If a foreclosed owner is applying for a financial job, he should have an explanation ready, perhaps describing how the foreclosure has changed some of his personal money-management skills today, Throckmorton says.

5. Getting hit with a tax bill
It seems like the ultimate injustice: You lose your home and then weeks or months later you open the mail and find a bill for taxes on the amount of mortgage that the lender was never able to recover from the sale of the property.

Any time debt is forgiven, it’s a potentially taxable event. You are not paying back money that you borrowed, so that money is considered income by the IRS.

However, there are some exceptions. Last year, Congress passed relief for foreclosed owners — but only those who lost their principal residence and didn’t have a mortgage that they had previously taken as a cash-out refinance to use the proceeds for expenses other than improving their home, says Julian Block, a tax attorney and syndicated tax columnist in New York City.

But foreclosure victims may still not have to pay a tax tab, even if they had a cash-out refinance. That’s because the IRS has long allowed taxpayers to escape a bill on forgiven debt if they are insolvent. If, for instance, you receive a Form 1099c from a lender saying it couldn’t recover $5,000 of what it was owed, but your debts exceed your assets to the tune of $15,000, you must file Form 982 with your tax return to clear your tax obligation.

6. Living through loss
The emotional toll of leaving a home and neighborhood are impossible to quantify. One recent report released by First Focus, a Washington, D.C., advocacy group, finds that about 2 million children are likely to be affected by foreclosure in some way, including the disruption of being placed in a new school after a move.

One glimmer of hope is that the large numbers of foreclosures today may lessen the stigma of the event, Throckmorton says. She remembers when job applicants had to explain frequent changes in employment, because jumping from job to job was frowned upon. “Now that’s considered normal. With foreclosures so much in the news, it may prompt people not to make judgments.”

By Marilyn Kennedy Melia, Bankrate.com