Susan V.'s Blog

A staggering 63% increase in California foreclosure filings for November 2011 from the previous month may have dire consequences for homeowners hoping to save their home.  Although most banks will suspend sales during the Christmas holiday, expect a surge of trustee sales the beginning of 2012.  Many borrowers have been lulled into a false sense of security because of the lender's slow pace or even lack of any action at all.  In some cases, borrowers are still living in their home after several years of not making any mortgage payments.  Well, looks like that party may be over.

Why now?  Why all of a sudden the huge uptick in foreclosure filings?  Over the last three years, banks have been struggling just to meet the tidal wave of defaults, and with the Robo Signing fiasco and ongoing federal investigations and lawsuits, they simply could not process the defaults within the normal time frame.  Several things have happened recently that have prompted lenders to get these bad loans off their books.

First, Fannie Mae started fining servicers who were not aggressively pursuing defaulted homeowners, and mandating that these loans be resolved-one way or another.  Secondly, lenders finally have trained staff and implemented procedures to adequately move the files through the process much quicker.  Lastly, the government programs are due to expire the end of 2012, so time is running out to clear out the bad mortgages and get the federal incentives.

The increase in California foreclosure filings means that homeowners are also running out of time and must make some hard decisions fairly soon. There are basically three ways to pull a home out of foreclosure:

1. Cure the debt-meaning pay all of the past due balance or depending on the time frame, you may be required to pay off the entire debt.
2. Qualify for a loan modification and begin paying the new payments-keep in mind that banks will still be moving the home towards foreclosure during the review process-this is called double tracking.  Many homeowners who thought they were getting a loan mod ended up losing their home instead.
3. Initiate a short sale-under the federal HAFA program, lenders are prohibited from moving a home to foreclosure sale while the home is being marketed and negotiated.  This buys the homeowner more time-usually 3 to 4 months of living in the home rent-free.

It had to happen sooner or later, so while this is bad news for thousands of homeowners, this is the only way that the California housing market can begin it's recovery.  Homeowners need to realize that getting a fresh start and moving on from their underwater home is often a smart financial decision.

Susan Gregory is a Certified HAFA Specialist, a Certified Negotiation Expert, Short Sale and Foreclosure Resource Agent, and an author of two publications for homeowners-including the best selling resource, The Complete Loan Modification Guide kit and Loan Mod Calculator.  Visit 2smartcookies.net for more information.