Friday, January 7, 2011

Q & A about my job

I've had alot of people lately ask me what I do and how I help people. So I have no idea how many people actually read this, and it probably will make everyone go zzzzzzzzzzzzzz but here it is.

My main priority is to prevent foreclosure. This doesn't always mean keeping someone in their home. Unfortunately, there are cases out there where keeping the home is not going to help the client in the long run. So how do I figure out whats going to work and do what I do?

A client will fill out a packet and I review the information. I go over their budget, bank statements, debts, etc. Then they come in for an appointment. We discuss ways to cut down budgets and live in "crisis" mode for awhile until things even out. That means making their priorities shelter, utilities, food, and transportation (unless they have massive amounts of money for loans, then we see about downsizing). I tell them how much money they need to cut out of their budget and they decide where to cut.

If all of that works out and they are able to cut down their budget, we then decide if its going to be best to stay in the home or liquidate. This is hard for alot of people who have their hearts set on staying in their home but truly can't afford it. Some take my advice and some I don't ever see again.

So if they CANNOT afford their home, I refer them to real estate agents and get them started on short selling their home. I work with their agent to turn in paperwork and such, and if after 2-3 months the home isn't selling, we apply for whats called a Deed-In-Lieu which is where they would sign the title or deed to the home back to the bank free and clear of any deficiencies. This gets them out without being held responsible for the home anymore, and generally gives them $500-$3000 moving cost incentives for choosing that option.

If they CAN afford their home, I run their numbers to figure out their ratios, how much will need to be capitalized to the balance of the loan, and try to determine a plan that will fit the client and the bottom line of the Lender. Once I get an acceptable interest rate and determine whether the loan needs to be extended by a couple months or possibly some of the principle reduced, I write up a negotiation offer. I then have the client bring in everything but their kitchen sink and we submit the packet to the Lender for review.

Depending on the Lender, the process can take anywhere from 30 days to 12 months. More are shooting for the shorter timeframe obviously, but sometimes it just doesn't happen. In that time, every month or two we have to turn in updated financials, and any other documents the Lender is requesting.

A sample of what I do would be this:

Client A is 3 months behind. They purchased for $150,000 and now owe $135,000 and have a PITI (prinicipal, interest, taxes and insurance) payment of $1100. Interest rate is 6%. They make $2500 a month. Their front end ratio is 45% and back end is 95%. After looking at their budget I determine they can afford to stay. So in general, a suggested house or rent payment should be about 31% of your income (front end ratio). Their target payment is $775.

So they are behind $3300 plus late fees. My plan would be as follows.

New balance: $138,300 (late fees waived)

New interest rate: 4.5%

New payment (PITI): $700.75

With no time extensions or principal reductions.

I know the Lender won't generally go for a payment lower than the 31% but I ask low so we can meet about where my clients need to meet. After a Lender verifies the income information and look at the offer, we duke it out (nicely) until we find a good resolve for both.

If the client is far enough along to have a sale date, I ask for a hold on the sale date or a postponement until a decision can be made. Generally they accept that and put the auction on hold. In extreme times they don't and we have to look at liquidation of the home or just letting it go.
In cases where the sale date is put on hold, the Lender will generally ask for some earnest money when the modification is approved, so I make sure my clients start saving for that from the get go.

Beyond that...I do our quarterly billings for our grants and help write grants when I can. Also just some odds and ends jobs for the housing authority itself not related to counseling.

So folks...thats it. Thats my job. Its a good job. A babysitting job most times, and definitely a tough love job. But I have my clients' best interests in mind always and just try to educate them so they can make an informed decision.

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