Facing Foreclosure: Cutting the Homeowner's Losses

HEY-OYE staff is giving good advice to homeowners with a "negative equity" (mortgage debt much greater than
the current market value of their home). Because governments or others are unlikely to rescue homeowners,
HEY-OYE staff recommends that homeowners take action. First, determine the home's current market value by:
1) finding tax appraisal values on the County or Municipal web site;
2) checking http://www.zilow.com/ or similar free web sites;
and 3) finding prices of "home comparables" on Realtor Mulitiple Listing Services by linking with real estate brokers.

If these current numbers are 25% below the amount due on the mortgage loan, the homeowner should
immediately conduct "good faith" negotiations with the Lender. If it appears
unlikely that the Lender, or the Servicing Agent on the mortgage, is unable or unwilling
to substantially reduce the principal amount due on the loan to correspond with the current
value of the house, the homeowner should contemplate abandoning the home. This
is a hard decision since it will damage the credit of the homeowner, on top of
the emotional trauma of leaving the home and losing the downpayment and all other related closing
costs and expenses.
 
HEY-OYE staff advocates practical solutions. If the current value of the home is 25% below the loan amount,
it is wise to cut the homeowner's losses by not prolonging the situation. Continuing payments on the mortgage
will not aliviate the outcome.

A good remedy is to lease a comparable home and attempt to negotiate a option to purchase. HEY-OYE staff can quide the homeowner with all these steps, including minimizing the impact of their credit rating (negotiations with Lender involving the "deficiency judgement" and/or deed in lieu of foreclosure), and otherwise counsel with the lease/option negotiations and subsequent credit remediation steps. While the current Homeowners Relief Legislation pending in Congress could offer Lenders an avenue to re-negotiate some of these "negative equity" mortgages, HEY-OYE staff cautions homeowners to be prepared to "walk away", especially if it appears unlikely that the Lender is willing to take such a large reduction on the principal amount of the loan to match the current value of the home.