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Avoid Foreclosure — Save Your Credit

Are you several months behind on your mortgage?

Is the phone ringing off of the hook?

Do you feel like just giving up?

This is the scenario that is sweeping across America!

The banks made it way too easy over the last few years to get more money out of our homes. Property values kept rising, the real estate market was booming and every homeowner was sitting on a gold mine. This was sure to lead to disaster and it has.

Now with the market declining and home values taking a dramatic plunge, most homeowners are sitting on over inflated mortgages and under valued homes.

The unfortunate part is that a lot of people can no longer afford their mortgage. They are facing the possibility of foreclosure and losing their homes is a very real threat.

The good news is that the banks are realizing this and are now giving homeowners options. Otherwise, the banks will be sitting on all of these homes after foreclosure and will be stuck paying the property taxes and insurances until they sell. Factor in the foreclosure costs, attorney costs, and marketing this is not in their best interest.

One option that is being offered is called a short sale.

This is where the bank allows you to sell your home at or below the current market value in order to get a quick sale, regardless of what you owe. Let’s say that your mortgage is $180,000, but similar homes in your area are selling for $150,000. You can ask for $150,000 and can even possibly take lower bids.

The bank in turn will take a loss on the home, since the sale will not cover the full mortgage, but they will not be stuck with the home. As far as the homeowner, they just walk away after the sale, free and clear.

It is suggested that you hire a real estate agent that is knowledgeable on short sales and preferably has had some experience and success with them. This is in your best interest, since they know the ins and outs and the paperwork involved. Not to mention, since you are already walking away with no money and this option will not cost you anything, it really is a no-brainer.

That’s right, not only does the bank take a loss on the home, but they also negotiate and pay the realtor fees.

Now there are disadvantages, and it is not as wonderful as it sounds. Your credit will suffer, just not as much as a foreclosure. It is estimated that your credit can drop 80-100 points with a short sale. However, it will drop over 200 points with a foreclosure.

You will not be able to buy a new home for up to 2 years with a short sale. It would be 3 years with a foreclosure.

Obviously, with this in mind the best solution would be to catch up your mortgage and then to make on time payments. Since this option is not viable for many people, I would seriously look into a short sale before it is to late.

Just remember that the mortgage company is not the enemy and not to be afraid of them. They are willing to help; you may just have to talk to several people until you find someone to work with. Ask if they have a loss litigation department. These are the people that are ready to and able to help you.

Stay Positive, Stay Strong, and Good Luck!

Avoid Foreclosure- Get Your Finances In Order

Foreclosure is one of the most traumatic things that can happen to a family financially. Foreclosure is a forced sale of property (your home) due to the fact that you no longer have the resources to pay for it. Foreclosure has affected millions of people in the last few years and this phenomenon hasn’t seemed to slow down. If you are looking to buy a home or already have a mortgage and would like to avoid foreclosure, one of the most beneficial strategies you can use is to get your finances in order.

How to Put Your Finances in Order
There are a few strategies for putting one’s finances in order. Since each person’s finances are unique, you must figure out which strategy works best for you. One of the most important ways to organize and understand your finances is to create and balance a budget. Many times we spend wastefully, keeping control of our spending is key to keeping our finances in order. With a budget, we can understand what our money is spent on, how much debt we have compared to our income and free up income in order to save or invest in the future.

In addition, for those with high credit card debt it is extremely important to reduce debt to a manageable level. This means paying your credit cards higher than the minimum payment asked for on a monthly basis, refrain from using credit cards for non emergency situation and holding off on purchasing items that are considered frivolous or luxury items. If your income is low, you may want to find a higher paying job. Easier said than done, many people choose job training or go back to school in order to find jobs that allow them a greater lifestyle.

Talk to a Financial Advisor
Another great strategy for putting your finances in order is to talk to a professional. A financial advisor is trained to help one manage their money more effectively. Whether you’re in debt or have millions in savings, a financial advisor can help a family or individual reach their financial goals. A financial advisor can look over your unique situation and tell you whether or not you may have problems taking out a specific mortgage. Financial advisors are able to discount emotion. So even though you want that home so badly, if it is above your means, your financial advisor will have no problem telling you the truth.

Start Now to Avoid Foreclosure
One of the ways you can avoid foreclosure is to put your finances in order and the best time to start is now. The quicker you start putting your finances in order, the quicker you will be able to afford that new home or reduce the risk of foreclosure. Unfortunately, many of us wait till we are already in the hole or about to foreclose to start managing our finances correctly. With a little prevention and money management you can avoid foreclosure.

How To Stop Foreclosure

Foreclosure is not a word that any of us wants to even hear, let alone think about the process happening to us. But, financial hardships may befall the most responsible people and the foreclosure process may look more and more like it may happen in your life or the life of someone you love. Thankfully, there are some things that you can do to stop from being foreclosed on. Foreclosure isn’t easy, and stopping foreclosure isn’t easy, but if you are well informed you can keep from losing your home.

Stop the process in its tracks

The best thing you can do is to stop the foreclosure process in its tracks. As you may or may not know, foreclosure is a long, drawn out process that gives the owner of the home plenty of chances to stop the process and deal with their debt. The first interactions that the bank or lender has with you is not part of the formal foreclosure process, and that is a good time to get a handle on the situation and really keep it from going any further. If you have missed a handful of mortgage payments, don’t write it off as too late to save your home and your current lifestyle. If the bank has not yet sent you a notice of foreclosure, the process is not yet official and you still have plenty of time to turn it around.

The first thing you should do is respond to the phone calls and the letters that are coming in the mail for you about your late payments. This may be painful and something you don’t feel like doing, but it will be less painful than having your home taken right out from under you. Call the bank your lender; you may be surprised to learn exactly how willing they are to work with you. If you explain what your financial situation is, your bank will likely be willing to work with you and will just be happy to hear from you. Sometimes, all it takes to stop the process from becoming a formal one is a response from you.

Once you contact the bank or lender you need to be prepared to set up payment arrangements that will get you back on track. Let the bank know exactly how much you can pay each week. Even if you can only pay a couple hundred dollars each week, this will eventually get you back to where you should be and the bank will consider it a good faith effort to keep your home and as long as you keep up with these scheduled payments, you’ll find that the bank is willing to work with you as long as you need them to so that you can keep your home as well as keep them off your back. It might take awhile, but you can get on top of your late payments. Remember, your bank doesn’t want to foreclose on your home, so you should take all of the chances you are offered and communicate with the bank about the issues you’ve had paying your mortgage, and then arrange payments, and be sure to make them.

Show the bank you mean business

Once you’ve received a notice of intent to foreclose, you still shouldn’t lose all hope. Most of the time you can still keep your home and reconcile the debt with your bank. You might have to make a larger payment or the bank may actually try to demand that you pay the debt in full, but if you get a foreclosure attorney involved you may be able to undo these issues. Most of the time if you can pay a portion of the missed payments on the spot you’ll be able to proceed normally and set up new monthly payments so that you don’t have to lose your home. An attorney can often step in and help you set up payments that will not leave you broke, but will also satisfy the needs of the bank. Sometimes it is easier to have an attorney present to sort of act as a middleman since this is a very stressful situation for most owners, and it can be difficult to keep emotions out of it. Attorneys will also be able to ensure that your rights are protected and that you have every chance possible to save your home from being foreclosed on.

If you miss the boat on this type of thing, you can actually show up at the auction for your home. As long as you are the highest bidder, the bank doesn’t care who buys the home just that the home sells. If you are intent on saving your home, the auction is a great place to be because there may only be a handful of people there that bid on the home and if you are able to put down a large sum of money, you might just win your house back! Don’t dismiss every chance possible to win your house back, as you may figure out how to come up with the money just in the nick of time.

As you can see, there are many ways to keep from being foreclosed on. Many people simply sell their homes, sell belongings, stock, or take money from savings accounts to pay off their debts and get back on track. Foreclosure does not only mean the loss of your home, it means damaged credit and the need to look for a new place to live. If more people would realize that the bank really does not want to foreclose on their homes and that they can take advantage of these offers by just picking up the phone and getting in touch, fewer homes would be foreclosed on. Banks will often help you refinance if you are just not able to make such big payments each month, or they’ll make payment arrangements for you to get on top of the debt. Don’t be afraid to ask questions, get help, and get aggressive about keeping your home because you can stop foreclosure.

Stopping Foreclosure

A good option that can help stop the foreclosure of your mortgaged properties is to try and get your financial problems out in the open. If you really want to stop the foreclosure of your mortgaged home, contact your lender immediately. If you know that your mortgage payment is going to be late, contact the lender as soon as you know.

Also, never ignore your lender’s attempts to contact you, and never believe that you cannot fix the problem. If you want to know more steps you can take or the options available to you when it comes to stopping forclosure, check out

You can also identify the causes of foreclosure in order to prevent it at the bare minimum. Many things can cause a foreclosure, and these may include any or all of the following:

•the loss of a job,
•high medical expenses,
•a change in real estate prices,
•credit issues,
•and economic instability among others.

The cases mentioned above can all cause foreclosure. Any type of situation that arises which prevents people to pay their mortgage on time is usually a cause of foreclosure.

Foreclosure is a very serious thing. Yes we can all pay smaller bills late, and sometimes we can neglect to pay our credit card expenses. However, these can ruin our credit ratings. With foreclosure, if you fail to pay your mortgage, you lose your house. Shelter is one of the basic needs in life, and foreclosure can take that necessity away in seconds. You need to know this in order for you to strive harder and plan ahead so as to prevent the foreclosure of your mortgaged properties.

You also need to know the technical details about foreclosure in order to determine the exact steps you need to take in order to prevent the foreclosure of your mortgaged properties. Foreclosure is a process in which a certain bank or a secured creditor sells or tries to repossess a piece of property. This occurs when the owner of the property is unable to or has failed to comply with an agreement between the lender and the borrower, which is more commonly known as a mortgage.

The violation of a mortgage is a default in the need for a payment of a promissory note, which is secured by a lien on the property. Once the foreclosure process is done, the lender has the choice to sell the property and collect proceeds to pay off the mortgage.

There are two types of foreclosure. These include judicial sale and foreclosure by power of sale.

Judicial sale foreclosure is allowed and available in every state. This type of foreclosure involves the sale of the foreclosed property as long as the sale is under court supervision. All money that is made during this process is sent to the property’s unpaid mortgage. Before foreclosure can take place, the residents of the foreclosed property have to be notified. However, notification issuance is usually set by state laws and rules.

The other type of foreclosure is foreclosure by sale. This type of foreclosure is also allowed by many states. This type of foreclosure deals with the sale of the property by the mortgage holder with the need of court supervision. This type is usually much faster.

Questions and Answers on Home Foreclosure and Debt Cancellation

Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in 2007, 2008 or 2009. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

The amount excluded reduces the taxpayer’s cost basis in the home. More information on claiming this exclusion will be available soon.

The questions and answers, below, are based on the law prior to the passage of the Mortgage Forgiveness Debt Relief Act of 2007.

1. What is Cancellation of Debt?

If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

2. Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets. Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception.
Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income. The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception.

Non-recourse loans: A non-recourse loan is a loan for which the lenders only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences, as discussed in Question 3 below.

3. I lost my home through foreclosure. Are there tax consequences?

There are two possible consequences you must consider:

Taxable cancellation of debt income.(Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans.)

A reportable gain from the disposition of the home (because foreclosures are treated like sales for tax purposes).(Note: Often some or all of the gain from the sale of a personal residence qualifies for exclusion from income.)

4. I lost money on the foreclosure of my home. Can I claim a loss on my tax return?

No. Losses from the sale or foreclosure of personal property are not deductible.

5. Can you provide examples?

A borrower bought a home in August 2005 and lived in it until it was taken through foreclosure in September 2007. The original purchase price was $170,000, the home is worth $200,000 at foreclosure, and the mortgage debt canceled at foreclosure is $220,000. At the time of the foreclosure, the borrower is insolvent, with liabilities (mortgage, credit cards, car loans and other debts) totaling $250,000 and assets totaling $230,000.

6. I don’t agree with the information on the Form 1099-C. What should I do?

Contact the lender. The lender should issue a corrected form if the information is determined to be incorrect. Retain all records related to the purchase of your home and all related debt.

7. I received a notice from the IRS on this. What should I do?

The IRS urges borrowers with questions to call the phone number shown on the notice. The IRS also urges borrowers who wind up owing additional tax and are unable to pay it in full to use the installment agreement form, normally included with the notice, to request a payment agreement with the agency.

8. Where else can I go to get tax help?

If you are having difficulty resolving a tax problem (such as one involving an IRS bill, letter or notice) through normal IRS channels, the Taxpayer Advocate Service may be able to help.

In some cases, you may qualify for free or low-cost assistance from a Low Income Taxpayer Clinic (LITC). LITCs are independent organizations that represent low income taxpayers in tax disputes with the IRS. Find information on an LITCs in your area.