What You Need To Know About the Foreclosure Moratorium

By Joshua C Anderson, Lexington Realty correspondent. October 19, 2010


Los Angeles (Lexington Realty) – - In the recent weeks all of the major lenders and loan servicers have all followed the same trend of halting there foreclosures. To a delinquent homeowner that may sound like the miracle they were praying for. However, the situation is much more complex than they ever imagined.

What the foreclosure moratorium is in a conspectus is merely a break for the servicers to review documentation that may have been overlooked in the overwhelming housing crisis. Many banks will go back and scrutinize the terms and conditions of the delinquent loans in an effort to help homeowners who may have been victims of fraud. The problem that persists is that many homeowners were not victims at all. First time borrowers knew they were getting into a home they could never afford, and in addition to housing prices dramatically dropping, many of them lost there jobs and were unable to pay there mortgages. The lenders will not excuse past due payments because they simply could not afford it. After the bail out of several financial institutions, lenders were required by the government to stimulate the economy by restructuring loans. Within weeks, even homeowners who were current on payments were applying for modifications. Unfortunately, the trend did not last long and would leave a trail of foreclosure in its midst.

The modification boom in many opinions was a disaster. Recent reports from the Obama administration stated that 60% of modified homeowners failed the program within the first six months, and millions of others never had the chance. In the climax of the modification boom, several third party law firms and company’s targeted homeowners for what little money they had left, and were charging anywhere from $1,500-$5,000 for a retainer fee that yielded no results. Fast forward to the present day, and we have record high foreclosures and unemployment crippling the housing market.
The modification program was indeed a failure and there are very few success stories. The only positive outcome of the moratorium is that a few lucky homeowners will get modified if they can afford it. Many at risk homeowners do not want to come to terms with the fact that even with a temporary mod, they will foreclose.  What homeowners need to consider now is cutting there losses and salvaging what they have left of there credit.
Much like the attempt to help delinquent borrowers by modification, there is a new trend on the block that so far, has proven to be the best exit strategy in the housing crisis. Homeowners who owe more than there homes are worth, now have the option to Short Sale. There are not many qualifying factors as there were with the modifications. If you are delinquent, unemployed, and underwater or simply down on your luck financially, a short sale is the best solution. A homeowner can be free and clear credit wise, within 14 months of the short sale and if your loan is a non recourse the lender by law has to forgive you of any deficiency. There is also no cost required to facilitate the transaction. Homeowners are encouraged to go with a well established short sale firm rather than a traditional Realtor because they often lack the experience to complete the sale successfully.
Within 14 months of the short sale, a homeowner can be eligible to purchase a new property and take advantage of the low prices that are flooding the market today and start from scratch.
The moratorium will prove to be just another wave of hope that will surpass many of the homeowners who need the help. Only 1/3 of the at risk foreclosure candidates were modified this year and the rest will likely foreclose.www.Housingassist.com is a well established short sale company who helps homeowners in those situations and counsels them through and even after the process is complete. They also hold seminars in different cities to educate homeowners on the subject.
With the foreclosure halt coming to an end, many will be right back where they were before it begun. It is the responsibility of the homeowner to asses there situation and make choices that will benefit them in the future.