Foreclosure Questions and Answers: Mortgage Financing Solutions Abound

Scott Sawyer, Executive Vice President of Vendor Relations for I Short Sale, Inc. is a twelve year veteran who deals with defaulted mortgages and loss mitigation.

Below, Sawyer shares his expertise in providing financing solutions which create “win-win” outcomes for both mortgage lenders and borrowers.

Question: When borrowers get behind in making their mortgage payments, many don’t feel that they can contact the lender. In fact, they often actively avoid the lender. Why is this such a big mistake?

Answer: From the lender’s standpoint, we have many options we can offer the borrower that the borrower is usually unaware of (which is one of the reasons why they actively avoid us). Whether they can afford to stay in the home or not, foreclosure is not the right solution in either case. It’s not a way for them to get out.

There are options for them to keep their home if it’s affordable to them and there are options for them to get out of the home if they can’t afford to make payments any longer. That’s where the mistake is made - there are options available to the borrower, but in most cases they don’t seek those options.

Question: How would you describe the relationship between [a home loan lender and a borrowers]? Aren’t they dependent upon one another in terms of working together, especially when problems arise?

Answer: The biggest concern is that a lot of times when a borrower is going into default, instead of turning to their lender as their partner and saying, ‘I need help. What should I do?’ They sometimes turn to outside options like bankruptcy attorneys, thinking it’s their only option. The most important thing in working together with their lender is that they learn there are better options for them that wouldn’t harm their credit as much and wouldn’t be so detrimental to their future.

Question: Most borrowers don’t understand this, so they panic and run in the opposite direction, don’t they?

Answer: They have this view of the bank as the “big bad lender” who wants to take their home. The last thing the lender wants is their home. Something that I always urge people to understand is that the bank does not want your house in any form or fashion. That is actually the worst option for both the borrower and the [mortgage lender].

Question: What are some options a lender may provide to borrowers who have fallen behind in their payments?

Answer: We definitely have to get them to their loss mitigation department, which most every lender has. In loss mitigation, we send out a financial package for the borrower to complete to get a good picture of where the borrower is at today. Let’s say they’ve had the home loan for five years. If I pull the original file, looking at their original financials means nothing because their lives could have changed dramatically in five years.

We then see if the ability is there for the borrower to make the payment. Modification or forbearance agreements are good options to help them get their loans current and keep them in the property.

If the borrower cannot afford to make the payment and they know they are going to lose the property through foreclosure, a good option is to get them to list the property and possibly do a short sale if they owe more than what the property is worth.

If they owe less than what it’s worth, obviously selling the property and getting the equity out would be a good option. Often a borrower will want to do a deed in lieu, where the turn the property back over to us. In doing a deed in lieu, usually the borrower doesn’t have a whole lot of equity, but they don’t have a lot of time either with a foreclosure encroaching on them and they just want to give the property back.

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