Help for Financially Distressed Homeowners

Help for Financially Distressed Homeowners

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If you are at least one payment late, you are considered a “financially distressed homeowner.”

Unfortunately, just because you are unable to meet your financial obligations, the bank may or may not believe you. Anyone can call and state that they can’t afford their house anymore and that they want to walk away from it. However with proof, banks can be surprisingly easy to work with.

If you are behind in payments, but not yet in foreclosure, a short sale is definitely possible. You’ll start by contacting the workout department. Your property would not yet be in the loss mitigation department. Typically, loss mitigation comes into the picture once the foreclosure paperwork has been filed. People are often confused about what a foreclosure is and what a preforeclosure is. Here is how we define these terms:

  • A preforeclosure is a property where the payments are late, but the foreclosure papers have not been filed.
  • A foreclosure is a property where the foreclosure papers have been filed, but the homeowners still own the house.
  • A bank‐owned property is where the payments were late, the foreclosure papers were filed, the house went to the sheriff’s sale, and the bank now owns the property.

Many people consider a foreclosure a property that already went through the entire process and is now owned by the bank. We want to make sure you use the proper terminology so that when you are reading the papers, watching the news, or talking to loss mitigation, you know what everyone is really talking about.

Because financial hardship typically does not happen overnight, gather information from the past two years. Typically, a homeowner begins by missing a payment here and there: being 30 days late on a mortgage payment, missing an insurance payment, being late on a credit card, paying two months of electric at once, and so on. Once the foreclosure is filed, things seem to spin out of control. This is why we want you to gather information from the past two years. It shows the unraveling of your finances.

If you are an investor and bought properties at the top of the market, find articles that show the beginning of the market decline, when your tenants moved out, copies of late payments, and all of the other items we mentioned previously.

Since you are financially distressed, again, proof is your best bet. Start putting your “Proof of Hardship Package” together immediately. Here is a list of information you will need. Gather as many of these items as possible:

  • Two years of tax returns that show your income has dropped.
  • Copies of lay‐off notices or proof that you were let go.
  • Copies of late electric bills.
  • If you are involved in a divorce, provide proof.
  • Copy any medical bills you have had in the past two years.
  • Articles of real estate market declines in your area.
  • Copies of the deeds of any investment properties you bought that have dropped in value.
  • Proof of empty rentals.
  • Proof of any rentals that were trashed by tenants.
  • If you are not getting child support, show proof.
  • Write a letter explaining your hardship
  • If you or anyone in your family has been to counseling, show proof. Counseling shows emotional distress.
  • If there is a probate situation, get a copy of the death certificate.
  • Copies of your bank statements—savings and checking. We are assuming that your cash flow is very low right now. If the bank sees that you have cash, it will want it.
  • If you have tapped into your 401 or any retirement fund, show that as well. We are going to talk about this later—not going broke over a property.
  • If you have cashed out a life insurance policy to make mortgage payments, show proof.
  • Maybe you have used your children’s college fund to keep up with the mortgage payments.
  • If you have pawned something, show proof.
  • If you are in jail or know the owner of any property who is in jail, that is a definite hardship.
  • If you have refinanced any property and used the money to make mortgage payments, show proof.

We’re sure you get the idea. The more financial hardship you can prove, the deeper the short sale. The deeper the short sale, the easier it will be for you to sell the property and start over.

Something to remember—whether investor or homeowner—whether in distress or not—once a bank accepts a short sale, you must sell the property. The bank wants the property off the books.

If you are ready to sell your home fast, White Sands pays cash for homes in any condition. Contact White Sands today to see how they can help you sell your home.

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