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Beware Of Foreclosure and Short Sales Scams:

The growth in the foreclosure inventory in the real estate market has created a clique of scamsters who prey on those facing mortgage payment problems. You must be careful about falling into their clutches - it could lead to huge unnecessary loses.

There is a great deal of misinformation being circulated about ways to avoid foreclosure and an increasing number of homeowners are receiving emails and phone calls that seem to offer advice on the best solutions to their problems. Many of these fraudsters are very sophisticated and can fool people into thinking they are legitimate companies and even government agencies that try to help homeowners facing financial problems. Those who fall for these offers end up losing far more than they should have and are placed in a position where recovery takes far longer than it needs to.

The best policy is to not respond to any unsolicited mails or phone calls. An offer of help that seems to good to be true usually is just that. However, if you are tempted to follow up on any, do a detailed background check on the people contacting you before taking any steps in dealing with them. And even if the checking you do appears to be satisfactory, insist on references and testimonials that you can verify.

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Does Buying Another House When Faced With Foreclosure Make Sense?

Many homeowners who anticipate being faced with foreclosure in the near future are being tempted by the 'buy a new one before you lose the old one" proposal. The idea is to use a good credit rating to finance a new house so that you have a home when you lose your current one. It sounds tempting but can be very dangerous.

Lenders look upon this scheme as being a fraudulent act on the part of the borrower. In many states they can sue for assets, including the new house, if this action on the part of the home owner comes to light. Here in California it is not so easy for the lenders to sue those who walk away from their mortgages, but the fact of having used a line of credit or refinancing under these conditions is grounds for a lawsuit. Any misrepresentation on a loan application can also be construed as fraud on the part of the borrower and invite legal action.

One of the most common tricks used in this kind of scheme is to produce a rental agreement so that the rental income can be shown to cover the mortgage payments. But once the new financing has been approved, the homeowner abandons the old property without renting it.

Many real estate agents find nothing wrong in this kind of transaction and help struggling home owners to work out this kind of buy and abandon plan. While this may be a legal gray area, the fact remains that buying a home under false pretenses is a crime. And lenders are not fools who will quietly sit back and be left holding the baby.

Stay away from any such schemes.

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The Truth About Credit Repair Schemes

The internet and TV are full of schemes that promise credit repair by "experts" who will remove all negative issues from your credit report so that your credit rating remains good and you can use this for loan modification and to stall foreclosure. They sound tempting and the consumer feels that he has nothing to lose so why not.

The fact is that even if the advertisements promise that everything that will be done is legal, you are walking into a trap. These offers are usually illegal and will cause you nothing but grief. It is illegal for anyone to collect payment up front for credit repair services. It is also against the law to make offers of credit repair that can not be done within the legal framework, such as removing foreclosure information from a credit report. Yes, credit repair is possible but only within the following parameters:

• Only inaccurate or out dated information can be removed from a credit report. Hiding it is not legal.
• Companies that say they can remove all negative information from your credit report are misleading you. Stay away from them.
• No reliable company will tell you not to contact the credit report companies directly - if they do, they are hiding something.
• Any company that requires you to pay them money in advance are in breach of the law.
• In California all companies must be registered with the Secretary of State to conduct any business related to credit services. Any company that is not is operating outside the law.
• Never listen to a company that advises you to apply for a new Employer Identification Number so you can create a "new" credit report. This is illegal and leaves you open to prosecution.

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Loan Modification Is Not A Miracle Solution

Many homeowners see loan modification as the best way to help them keep their homes. While it is a boon for many, it is not an easy way out of financial problems.

Before looking at loan modification as a cure all for a homeowner's financial woes, it must be understood that this is a two way transaction and any modification needs to protect the interests of the lender as much as the borrower. Loan modification is possible if the borrower feels it will help him and the lender feels that any such modification will result in enabling the homeowner to pay off his debt and so reduce the chances of the loan going into default and causing losses to the lender.

A loan, in its simplest form is a contract between a lender and a borrower under which the lender provides financing to the borrower under specified terms and conditions. This contract details the rights and duties of both parties.

In the case of a mortgage loan, the contract will spell out the amount of the loan, and the schedule of repayment that is required to keep the loan in good standing. The amount of interest payable on the loan is also specified. The recourse of the lender, if the borrower defaults, is also clearly given.

As circumstances that affect either party may occur during the pendency of the loan, the terms and conditions may be changed as long as both parties agree to it. No modification of the loan terms and conditions can be made by one party without the express consent of the other. If a modification is offered by one party and the other does not agree, no modification can take place.

Homeowners should not attempt to negotiate loan modification without expert assistance. It is a complex subject and very few home owners have the expertise to be able not only to negotiate the modification in their best interests, but may even subject themselves to unforeseen pitfalls in the future which could make their situation even worse.

The common elements of loan modification are a reduction of the loan amount, reduction of the interest rate, changes in the amortization terms or a combination of these conditions. A seemingly attractive change in one condition may be offset by a change in another so care must be taken to examine the totality of the consequences on any proposed loan modification.

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Understanding The "Homeowner Affordability And Stability" Plan

The government's $75 billion plan to enable lenders modify their loan terms to help struggling home owners is a welcome step. It is not a mandatory for all lenders but does make loan modification more attractive to them. To be eligible for the benefits of this program, home owners have to meet certain conditions.

Any homeowner who wishes to be eligible for loan modification under this plan must meet the following conditions:

• Be the verified owner in occupation of the property - a single family home, condominium or cooperative.
• The house should not be either vacant or condemned.
• The loan to be modified must have been taken prior to January 1st, 2009.
• The outstanding loan amount must not exceed $729,750 (1-unit), $934,200 (2-units), $1,129,250 (3-units), $1,403,400 (4-units).
• The loan repayment must exceed 31% of the borrower's gross monthly pre tax income.
• The borrower's income or expenditure must have undergone a significant change to the extent that the current repayment is no longer financially viable.

The following conditions will also apply to any loan modifications under this plan:

• Delinquent borrowers are not eligible for loan modification under this plan.
• Borrowers in bankruptcy many apply for loan modification under this plan.
• Borrowers involved in litigation regarding their mortgages may apply under this plan without affecting the status of their litigation.
• Only one loan modification will be allowed under this plan.
• There is no minimum of maximum loan to value ratio for eligibility.