Solutions to Foreclosure on Hawaii Island Real Estate
Are you facing foreclosure on your Hawaii Island real estate? You’re not alone. Though national foreclosure rates have been consistently declining, Hawaii is one of 12 states that experienced an increase in foreclosure rates by the end of 2016. Foreclosure activity increased by 20%, and 66% of those foreclosures consisted of legacy foreclosures, the second highest rate nationally. In other words, about two thirds of foreclosures in 2016 were made on loans obtained between 2004 and 2008. Even after years of considerable market growth, Hawaii Island real estate is still reeling from the effects of the 2008 market crash—and the situation doesn’t appear to be improving.
So what are you to do when faced with a foreclosure notice? First: don’t panic. The good news is that the majority of foreclosure notices do not actually result in foreclosure. The foreclosure process takes an average of 2-12 months to complete. The exact time frame is largely contingent upon whether your lender chooses to pursue judicial proceedings. Even if your lender publicizes your debt and puts your property up for auction, they may not find a buyer. In the time that your lender is working to foreclose, you have two options: work to rescue your property from foreclosure or relinquish your property in order to cut your losses. When faced with foreclosure on your Hawaii Island real estate, it is essential to stay positive, communicate with your lender, and explore your options. Read on to learn more about the specific steps to take after receiving a notice of foreclosure.
Stay Positive, But Be Realistic
Before taking any significant steps to prevent foreclosure, it is essential that your mind is in a clear, forward-thinking place. It is easy to feel bogged down by feelings of negativity and helplessness when faced with foreclosure. The prospect of losing your home is destabilizing, and many suffer embarrassment and shame in their inability to make payments. The follow-up to a foreclosure notice requires a lot of time, energy, and focus. It is important to think positively and realistically when faced with foreclosure, as negativity and doubt can be immobilizing and increase the likelihood that you will suffer significant losses.
You DO have options, people DO want to help you, and you CAN securely own a property in the future. However, no one will simply find solutions for you. It is your responsibility to explore your options and modify your spending habits instead of ignoring the problem.
Communicate with Lenders and Counselors
Once you receive a foreclosure notice on your Hawaii Island real estate, it is crucial to contact your lender directly. If you demonstrate strong resolve to keep your property, your lender is more likely to pursue flexible alternatives to foreclosure. Lenders can offer loan modifications, such as adjusting the loan to a fixed rate, lowering the mortgage rate, eliminating existing balances, and extending the loan term. In order to determine a fair course of action, the mortgage company will analyze your income, debt, and personal circumstances.
The Department of Housing and Urban Development employs counselors that can assist you through the foreclosure process. HUD counselors can provide free advice, explain state foreclosure laws, assist in assembling proper documentation, and even represent you in negotiations with your lender. If you are insistent on keeping your property, counselors will examine your finances and expenditures to construct a budget to determine your maximum allotment toward a mortgage. A counselor’s ultimate goal is to examine your unique situation, explore your options, and find appropriate solutions that you can propose to your lender.
Call your lender’s loss mitigation department and alert them to the fact that you are working with a counselor. Those who work with counselors are 1.6 times less likely to be foreclosed upon. They also receive, on average, loan modifications that are $454 higher than those who do not work with a counselor. If your lender knows you are working with a counselor, they are more likely to recognize and be receptive to your commitment to keeping your property.
Review and Record
It is essential that you have your documentation in order when faced with foreclosure. Notices are typically issued 30 days after the first unpaid mortgage. File away all notices, and record the dates, times, and content of interactions with your lender. Keep copies of all documents pertaining to your mortgage, your lender, and foreclosure. Should your lender undertake judicial proceedings, you need to be equipped with the proper documentation to mount a defense.
It is also important to know the stipulations surrounding your loan. Review old documents to determine the steps your lender can take in the event of foreclosure. Some lenders can actually sell your home for you if you miss enough payments. You should also review your state foreclosure laws and agreements with your lender, as you may be entitled to “right of redemption”—a time period during which you can attempt a reversal of the foreclosure by compensating for missed payments.
Apply to the “Making Home Affordable” Program
The “Making Home Affordable” program is a federal service for those modifying their loans or refinancing their homes. The program allows those facing foreclosure on Hawaii Island real estate to explore their options and assists them in finding affordable solutions.
“Making Home Affordable” advises that those facing a temporary financial crisis explore mortgage reinstatement, or paying all missed payments and fees at once. They also list repayment plans and forbearance as appropriate options for those in a short-term bind. A repayment plan is a compensation plan that allows you to cover unmet payments while continuing to pay your monthly mortgage. Forbearance requires that you collaborate with your lender to determine a temporary decrease or suspension of a mortgage payment.
Those facing long-term or permanent financial distress might find more success in pursuing mortgage modification. Making a mortgage modification requires altering the mortgage terms on the loan balance, term, or interest rate. “Making Home Affordable” also advises short sale. Short sale entails selling your home for less than the remainder of your mortgage balance in order to pay off your existing balance. Finally, they list Deed-in-Lieu of Foreclosure, or the transference of property ownership to your lender, as a viable option. Doing so eliminates your loan and mortgage payments.
If you are interested in utilizing the “Making Home Affordable” service, talk to your lender. Your application to the program must first go through your mortgage company.
Real Estate Investors
Working with a real estate investor can be a huge relief for those facing foreclosure on Hawaii Island real estate. Real estate investors are able to close upon a deal in 7-30 days. They will often even pay in cash and/or assume your mortgage payments. The time and money that you save by selling your home to a buyer or going through the foreclosure process when selling to a real estate investor could prove to be your saving grace. Because foreclosure can cripple your credit score, selling quickly is essential. Real estate investors help you protect your credit score, make money quickly, and avoid the headache of negotiations and judicial proceedings with your lender.