Will the Bank Accept Less Than The Total Owed?
Maybe, but no homeowner knows in advance how much a bank will accept or even whether it will consider an offer for less than the total amount owed. The best idea is to speak with the bank about getting the principal reduced in a loan modification or allowing the borrowers to pay less than what is owed in order to sell the house in a short sale.
Without calling the bank and beginning the negotiation process, homeowners will never know whether they could have qualified for a way out of foreclosure or not. While many borrowers do not qualify for any solution, they may be successful in gaining more time to stay in the home and save money, but the ones who never even try are guaranteed to lose their properties to foreclosure.
How are Liens on a Home Given Priority?
Liens are given priority in the order that they are filed. Liens for property taxes, however, will be given priority in the case of a foreclosure sale. But after any back taxes are paid, then the lien filed in first in chronological order will be given the highest priority.
Thus, any second mortgage or judgment lien will be paid off in a sheriff sale only after the property taxes and first mortgage are completely paid off. This is one reason why second mortgages come with higher interest rates -- there is an increased possibility that the lien will not be paid off in the event of foreclosure.
What Kind of Tax is a Property Tax?
Property tax is an ad valorum tax. An ad valorum tax is based on the value of the good or service or property. The tax is usually imposed on an annual basis and the property's value may be reappraised periodically (usually every year).
Other types of taxes include excise taxes, such as sales taxes, and income taxes, such as the federal and state withholding taxes on many people's weekly wages. Property taxes, though, are considered ad valorum taxes and are imposed at the county level in many states.
Does Loan Modification Result in a New Deed?
Not usually. Deeds are typically executed when the ownership of a property is transferred and are used to show that the title has been switched from one person's name to another. In a loan modification, ownership does not get transferred in between parties, so there is little reason to prepare a new deed and have it recorded.
In fact, one of the scams that many homeowners have fallen victim to when attempting to stop foreclosure is transferring the title out of their names by executing a quitclaim deed. The scammers then record the quitclaim deed and gain title to the property, which just may lead to foreclosure that much faster.
Should I Write a Letter Requesting a Loan Modification?
This is usually called a hardship letter, and must be included with the application for a loan modification. In general, homeowners should describe what caused them to fall behind in their mortgage payments, whether it was a job loss, medical emergency, or other issues. Also, the borrowers should detail what they did to solve the problem, how they recovered from it, and what they are doing to make sure that they never fall behind again.
Homeowners should use the hardship letter as an opportunity to gain more understanding of their situation and make the best case they can to the bank. If the borrowers have fully recovered, they should state this, and if they have replaced some income but their situation has permanently changed, they should also disclose this to the bank. The more information the bank has that may not be explainable anywhere else but the hardship letter, the better.
Should I Use a Template to Write the Hardship Letter?
While there are templates and forms that can be found online and in various software programs to help homeowners write a hardship letter, the best idea may be to discard these aids and write the letter themselves. The hardship letter is the borrowers' opportunity to explain what happened to cause them to fall behind, what they did to fix the situation, and why they are not expected to miss any payments in the future. This could be done more effectively with hard work and reflection, rather than plugging a few details into a template.