Looking for a solution to a financing nightmare?

Have you really tried to work with your lender to correct that sub-prime loan? Most people do not. I am not talking about speaking with the robo-collector who has just one annoying purpose in life - be nasty to get you to pay up. It is not in their best interests to help you out of your current situation since they generally collect a commission every time you cough up a little cash to make them go away.

I am talking about speaking with an officer within the institution itself to work out a solution to the problem before your property goes into foreclosure. Once the property goes into foreclosure, you are still in a position to refinance but generally the lender will be looking to tack on all of the fees associated with the legal action.

Before we get into details I am not offering legal advice, I am simply sharing a possible solution which is being used successfully right now by savvy investors and the State of Connecticut to save a home from strict foreclosure.

You may be in the drivers seat...

The lender already put out the money on your property, the loan is already in place the lender is looking to recover that money plus a fee. Wise investors are walking into the middle of these deals and assuming your note by doing little more than paying closing costs and assuming your payments, turning your bad loan into a good one.

Lenders are failing every week because a large percentage of their loans are going bad. With foreclosures reportedly up over 120% this year it is no surprise that the lenders are in hot water. It has reached the point that some lenders are unable to attend all of their foreclosure hearings and homeowners are unsure of what they should do.

This could be your one chance to turn their misfortune into your opportunity to save your home. Generally when a property becomes delinquent 60 days or more it is considered in default and turns into more red ink on the lenders books.

In an up economy lenders love these transactions because they are few but very lucrative to the institution as they translates into additional income by way of extra fees and interest and when the economy is rolling the lender can quickly flip the property, recover their money, and keep the profits. In a down economy like we are in now the lender has a harder time recovering the fees and chances are they will be stuck with that property leaving them holding the debt. This means red ink and lenders do not want to show losses.

Ways you can turn this around?

If you are being forced into foreclosure because your mortgage was based on an introductory rate, which jumped up after a period and you are now unable to make your payments you can use your previous payment record to show good faith with your lender. Obviously you have a history with the lender that shows you have the ability to pay your mortgage. If you have a lawyer, it is probably better to let them do this work for you. It is faster and easier for them to contact the right people and make your offer.

Your offer is that the lender refinance you at the original rate or an agreeable rate based on your credit and ability to pay, and add the arrearage to the new mortgage. Again the lender will probably want to add on any legal and late fees to the of the repayment amount. Your lawyer can work this out.

I am not suggesting that this is a license to steal or that your lender will be open to listening, but many have figured out that it is better to work with their borrower then get stuck with the bad debt. If you had a good relationship with the lender and then were unable to continue because the financing jumped to a level outside of your ability to pay it makes sense to give this a try. Keep trying until they take your keys away. Often your loan officer is not aware the current financial situation of the institution until they are in dire straits and need to take immediate action to save their jobs.

I always suggest obtaining legal assistance when attempting this type of transaction to ensure you are not making things worse then they already are. Many of the people in this situation today opted to use the lenders attorney to save on fees and closing costs and later found out that while the transaction may have been legal they were not really clear on of the possible future consequences of their actions. It is always best to have personal legal representation when you are entering into any type of contract.

Michael Zimmer is the President of The Meadows of Southington Condominium Association, Inc. Michael has served on the board of directors for this 166 unit complex in Southington for over 15 years and has held the position of President for the last 12 years. He can be contacted via email at mjzimmer@bigplanet.com.