Avoiding Foreclosure:

Options for Homeowners

Steve Roake, SFR

Mccolly Real Estate
www.roakehomes.com
(815)603-0077
 Overview
• 2009 – 2.9 million homes foreclosed
• 2010 – 3 million homes expected to reach default
• Feb. 2010, Illinois had 17,312 properties in
foreclosure, which means 1 out of every 303 housing
units is in foreclosure1
• Will County has 1 in 177 homes in foreclosure2
• Kendall County has 1 in 165 homes in foreclosure
• Plainfield has 1 in 99 homes in foreclosure2
 Options for Homeowners
• Refinance
• Sell and Bring Cash to Closing
• Loan modification
• Short Sale
• Deed in Lieu of Foreclosure
• Foreclosure
• Do Nothing and Walk Away
• Bankruptcy
 Refinance
• Owners who are current on their mortgage but anticipate a
shortage can qualify to refinance.
• The Making Home Affordable Initiative3 began in early 2009
• Refinance Eligibility requirements apply
– Must be owner occupied
– Loan owned by Fannie Mae or Freddie Mac
– Loan to value (LTV) between 80-125%
– Borrower is current on existing mortgage and has income
to support new payments
 Sell and Bring Cash to Closing
• Homeowners with sufficient cash reserves can sell
the home and avoid damage to credit scores by
selling the home and paying any shortages
– Ex.
• Mortgage balance is $250,000
• Sell home for $240,000
• Owner must pay $10,000 deficiency at closing
 Loan Modification
• Lenders can change terms of original note
– May be short term adjustment
– Must be owner occupied
– Payments must exceed 31% of gross income
– Must have hardship and imminent risk of default
– Modification must be less costly than foreclosure to lender
– Usually has 3 month trial period
• Drawbacks
– Attorney fees to negotiate modification ($1500-2500)
– 52% of loan modifications are back in default after 9 months
 Short Sale
• Sells the home at market value
• Homeowner must have hardship
• Lender pays all expenses and closing costs, no money from
homeowner
• Homeowner’s credit score lowered by less than foreclosure
• May have Gov’t incentives to lender and homeowner
• May allow time to sell the property and delay foreclosure
during marketing time
• Can take more than 6 months for lender approval of contract
 Deed in Lieu of Foreclosure
• Borrower signs deed to property over to lender
• Lender gets property in better condition and in less
time
• Borrower may get release of obligation
• Credit damage similar to foreclosure
 Foreclosure
• Home is sold at auction
– In many cases bank owns the home, if property does not
sell
• Owner may have 30 days after foreclosure to vacate
• Lowers credit score by 200 points or more and
prevents future homeownership for 7-10 years
• Lender may seek promissory note to repay amount
owed (IL is a recourse state)
 Do Nothing and Walk Away
• Similar to foreclosure
• Lender will take possession of home by
changing locks
• Lender may seek financial recourse
• Credit score will be lowered and foreclosure
entered against homeowner
 Bankruptcy
• Costly to homeowner ($500 mo and up)
• Suspends foreclosure process
• Foreclosure may continue after bankruptcy
• Stays on credit for 7-10 years and lowers credit score
 Helpful Contacts
• Steve Roake (815) 603-0077
– Short Sale and Foreclosure Resource Certified
Realtor
• HUD Counselors (800) 569-4287
• Your Lender’s Loss Mitigation Dept.
• Attorney Specializing in Loan Modification
– Call Steve for Referrals
•Do not sign over your deed to anyone offering
to help
•Use caution: anything sounding too good to
be true, probably is
•Consult professionals and carefully decide a
course of action
 Additional Information
• Foreclosure and the devastation to your family and
credit that it brings can be avoided
• You must be proactive in seeking help
• I can help you decide the best course of action for you
and your family
• I may be able to put you in contact with an investor
who will make you an offer on your home
immediately. This should suspend the foreclosure
process and give you time to explore all the options
available.
 Information Sources
• 1 – retrieved from http://www.realtytrac.com/trendcenter/ on 4/7/10

• 2 – retrieved from http://www.realtytrac.com/trendcenter/il/will+county-trend.html on

4/7/10
• 3 – retrieved from http://makinghomeaffordable.gov/ on 4/7/10
• 4 – Short Sales and Foreclosures: What Real Estate Professionals Need to Know, presented by
Lynn Madison and REBAC
 For Additional Information
Steve Roake, SFR
McColly Real Estate
16037 S. Harlem Ave, Tinley Park, IL 60477
Office: (708) 802-9330
Direct: (815)603-0077
www.roakehomes.com