In recent months I have begun meeting with Oregon clients dealing with mortgage problems. Common mortgage problems include the following:
- Property is “under water,” in that debt exceeds equity, especially factoring in the cost of sale (usually about 6%).
- Client is locked in to one or two mortgages with very high interest (6 to 9%), compared to rates available over the last two years (3 to 5%). Further, Client’s lack of equity in the property prevents a refinance to a lower interest rate.
- Client purchased a property with their significant other (not spouse), and then broke up. The party staying in the home cannot refinance to get the other party’s name off the mortgage(s), because the property is under water.
- Client has been unable to consistently to make mortgage payments because of a loss of employment or decline in income. Foreclosure proceedings have been, or will soon be, filed.
While every client’s situation is unique, my general approach is as follows:
- The question of whether a bank can obtain a deficiency judgment against Client is often decisive. If the bank(s) cannot get a deficiency judgment, then foreclosure may be Client’s best option.
- The real estate industry has disseminated a lot of propaganda to consumers about the danger of foreclosure, and the supposed benefits of a short sale instead of foreclosure. In many cases, a short sale may offer no benefits to Client compared to a foreclosure, but is much more time consuming, aggravating, and possibly more expensive.
- I believe that banks (i.e., corporations) approach mortgages from a narrow financial self-interest perspective. The bank will take whatever action it believes will increase its bottom line, hopefully within the confines of state and federal laws. In my opinion, consumers should also use this approach, and be prepared to walk away from a mortgage that is a financial liability for their family.
Overall, dealing with troubled mortgage issues is very stressful, and I am happy to be able to assist clients in moving forward with their lives.