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Below is part two of three part series on the Foreclosure crisis that appeared in the the Northwestern suburb newspaper July of 2007.  The information is still fresh today.  I will post the final installment the week of May 3rd. Enjoy!

Foreclosures – A Nationwide Epidemic

Follow-up

By Dan Chiappetta

Due to the response that was received from last weeks article (Foreclosures – A Nationwide Epidemic), this weeks article on “How to Buy Foreclosure Properties” will be postponed a week in order to provide more information on the pre-foreclosure/foreclosure process.

The redemption period provides the homeowner the opportunity to keep the house and is in effect during the foreclosure process. The time it starts and ends will be different for each homeowner (check with an attorney or the bank to see when it starts and ends). The homeowner must pay past mortgage payments, penalties and any legal fees, to name just a few items, which must be paid in order to keep the house. What needs to be paid ay will depend on what the homeowner and the bank’s Loss Mitigation Specialist have agreed to.

A Short Sale occurs when the homeowner owes more on their mortgage (1^st and 2^nd mortgage) then the house is worth. If the bank agrees to the short sale, they may send the homeowner and the IRS a 1099 form for any amount forgiven that will be treated as income. The homeowner may be able to off set this amount by filing the appropriate tax forms, but certain parameters need to be met. The homeowner should check with a tax advisor BEFORE the sale to see if they qualify in order to avoid any surprises in the next tax season. .

Deed-In-Lieu of Foreclosure is sometimes known as a friendly foreclosure because it is carried out by mutual agreement, rather then a lawsuit. The bank takes the house and subject to all junior liens (junior liens are liens other then the first mortgage lien). In the foreclosure action, all junior liens are eliminated (homeowner is relieved of the junior liens). The bank will also keep any equity (if there is any). The homeowner’s credit report will say “deed in lieu of foreclosure” rather then “foreclosure”.

The homeowner may lose their house if they are delinquent on their real estate taxes. This process may take up to two years before the home is taken. If the taxes are not paid by the due date of the second installment, the county can enforce the tax lien and request that the circuit court order a tax sale (called an Annual Sale). All statute requirements must have already been met before the sale can happen. The tax debt is what is being sold at the Annual Sale, NOT the house. The bidder (purchaser) is bidding to buy the tax debt and the rate of interest that they will charge the homeowner when the tax is paid during the first six months of the redemption period. In short, the purchaser is paying off the homeowner’s tax debt and the homeowner will now have to pay the purchaser the tax debt along with the interest amount that was set during the bidding process. The purchaser of the winning bid receives a certificate of purchase after the tax debt has been paid. The certificate will turn into a tax deed if no redemption is made by the homeowner within the statutorily period (which is two years). The tax deed must be recorded within one year after the expiration of the redemption period or it becomes null and void.

Non-profit organizations dedicated to helping consumers avoid foreclosure are available and can be a great resource. You should contact a HUD – approved counseling organization to get advice on your situation. The U.S. Department of Housing and Urban development (HUD) website (www.hud.giv/conseling) has a list of HUD-approved counseling organizations. This list can be used to find a good counselor. They can be reached at 800-569-4287.

NeighoborWorks® is an approved non-profit organization dedicated to helping people avoid foreclosure They do not fee charge a fee and they work with the Homeownership Preservation Foundation to support a nationwide foreclosure assistance number (888-995-HOPE). Visit their website at www.nw.org to get more information.

Watch out for questionable counseling companies who advertise that, for a minimal fee, they will assist the homeowner by hiring a lawyer to defend the foreclosure in court or negotiate lender assistance on the homeowners’ behalf. You should call a HUD-approved counseling organization, a local NeighborWorks® organization, or 888-995-HOPE before you pay or sign agreement.

If you are in a foreclosure situation you should realize that there are organizations that want and can help you. You should contact the above organizations for guidance and counseling. You have nothing to lose if you call them and in fact you have something to gain, your house.

Next week – Ways to buy foreclosed property.

Dan Chiappetta is a Broker/Owner of Chiappetta Realty Group servicing the DuPage near west suburbs. He can be reached at 847-542-2076 or visit his website at www.ChiappettaRealtyGroup.com