HOW TO STOP FORECLOSURE
Foreclosure happens when borrowers stop making their monthly mortgage payments to the bank or lender that provided the loan secured by their property. You might be surprised to learn that foreclosure can happen to the most unexpected people, even those who have substantial equity in their homes. Let me share a recent experience.
In 2001, I helped a woman whose husband had just passed away refinance the mortgage on her home into her name. In 2007, I refinanced her mortgage again and arranged a home equity line of credit because she needed additional funds. Her only sources of income were Social Security and rent she received from renting rooms in her house. Together, they provided enough money to cover her monthly mortgage obligations. Everything seemed to be working well until a few months ago, when I received a phone call from her daughter.
The daughter’s family was now living in the house. Unfortunately, while the family was between jobs, the mortgage payments stopped. After several months without payments, the lender issued a Notice of Default (NOD), and the property was facing foreclosure. Imagine the situation. The house was worth approximately $4 million, yet the family was at risk of losing it because they could not keep up with the mortgage payments. To make matters worse, the mother’s credit score had dropped to 570, making conventional refinancing extremely difficult.
But as I always say, there is almost always a solution. We just need to find it. After exploring the available options, I was able to arrange an equity utilization loan, better known as a Reverse Mortgage. One of the important benefits of a Reverse Mortgage is that borrowers are not required to make monthly principal and interest payments. They must, however, continue paying property taxes, homeowners’ insurance, and other property-related obligations, and meet the loan’s occupancy and maintenance requirements. This solution allowed us to address the outstanding mortgage obligations and stop the foreclosure process, protecting the family’s substantial home equity.
But there was another important part of this story. The daughter had a properly prepared Specific Power of Attorney, allowing her to act on her mother’s behalf. The property was also held in a trust. These documents played an important role in allowing us to move forward with the transaction.
And this brings me to my realization. Planning ahead can make the difference between protecting your home and potentially losing it. Many people believe that estate planning is only about what happens after we pass away. In reality, properly prepared legal documents can be just as important while we are alive, especially when unexpected circumstances arise.
My message to all of you is simple. Make sure you have an appropriate trust and power of attorney prepared by qualified professionals. These documents must be designed for your particular circumstances, and not every power of attorney or trust automatically authorizes a mortgage transaction. If you do not have these documents, or if they have not been reviewed for many years, now might be a good time to take action.
And if you or someone you know is having difficulty making mortgage payments or is facing foreclosure, do not wait until the last moment. The sooner we explore the possibilities, the more options we may have. Feel free to reach out to me if you need mortgage assistance or recommendations for qualified estate planning professionals.
Remember, your home equity represents years of hard work. Protecting it is worth the effort.
Manny Kagan
Mortgage Broker | 40+ Years of Experience
(415) 225-7920
