Settlement Considerations

There are many factors to consider when settling with your mortgage company.  What is in your best interest?  If you don't plan on staying in your home for more than five years it is important to find out your property -- and market -- values.  It would not be in your best interest to keep your home if you plan on selling; yet, your mortgage is higher than your home's value.  For example:  in my neighborhood there were eight homes lost to foreclosure which dramatically decreased home values.  One previously valued $135K home sold at Sheriff's Sale for a scant $41K!  And, though that is the lowest sale price, it is indicative of the disparity in worth vs market value in my neighborhood.

What to do?  Have an independent appraisal done on your home to assist in decision making.  If your home is valued far lower than the mortgage balance, keep and/or sell everything that is of value within the home [appliances, etc], then turn the home over to your mortgage company and accept a cash settlement, instead.  Considering that you've reached the point of foreclosure, it's unlikely your credit is good anyway, so turning your house over to the mortgage company during a settlement proceeding should not affect you greatly.  Note that I say, "should not."  Any time you give up the rights to a home or vehicle it will affect your credit in some way.  But, in the case of settlement, you would have the option of including a consumer statement on your credit report with an explanation of the settlement.  Consumer statements generally do hold some weight with creditors.

On the other hand, if you know that you are going to be staying in your home for more than five years -- and your home valuation is reasonable -- it may behoove you to request a low interest, fixed rate mortgage and a cash settlement.  Don't be unreasonable with regards to cash settlements.  It doesn't help you in the least and will appear to the courts as if you were only seeking financial gain in the first place.  Instead, focus upon what's best for your future -- eliminating the penalties and fees accrued on your account, and the low interest/fixed rate mortgage over X number of years.  It is not unreasonable to request that the mortgage company fund your escrow for X number of years, either.

Finally, consult with your lawyer but, before doing so, be sure to know FOR SURE what you want out of your settlement for there is no going back once you sign the papers [unless, of course, you include a right of rescission clause!].

It Starts .............

My first set of financial documents - the ones requested by my mortgage company and its law firm - was completed and sent in September, 2008.  It included my previous year federal taxes, a pay stub, the completed hardship documents, and proof of the robbery, roof replacement, boiler replacement, gas leak, and all other relevant information related to my case.

This is now one of the critical components to my HUD case - the fact that I have proof that I provided all of the documents to my mortgage company - upon the date requested.

Whether you are just beginning a loan modification or are in the middle, do your best to keep track of the date/time of all documents and when they are sent.  If you can, when sending by snail mail, get a return receipt so that you have a signature proving it was received.  If by email, get a confirmation that it was received.  If by fax, hold on to that confirmation page - staple it together with the originals!!


Foreclosure magistrates are well aware that there is "something" going on with mortgage companies and, if you get to the point of foreclosure, will be more than willing to work with you in mediation to come to a resolution if you can prove that you have been jerked around by the mortgage company :)  Also, by keeping those documents, you will be able to get yourself in on the class action against the mortgage companies in the future.

DOCUMENT!  DOCUMENT!  DOCUMENT!