FORECLOSURES ARE ON THE RISE. DO OWNERS HAVE OPTIONS?

An article in The Reporter on November 22, 2010 offered the following sobering statistics about home foreclosures:

Montgomery County foreclosures skyrocket

“Home foreclosures in Montgomery County have more than doubled in the past 10 years. In 2000, 1,054 residential foreclosures were processed in the county. By the end of 2011, Montgomery County officials expect to process at least 2,600 foreclosures. The county is averaging 10.74 foreclosures a day, and with the foreclosure filings comes an unexpected source of revenue. There are three parts to a home foreclosure filing, and each has fees attached to the process. The first step is the Complaint of Mortgage Foreclosure that carries a $251 filing fee. If a settlement is not reached, the next filing would be a judgment for the amount owed, with a fee of $14.75. If the judgment is not satisfied, the final fee of $25.25 would be to file a Writ of Execution for the property to go to Sheriff’s sale. If the expected 2,642 foreclosures are finalized this year, the county will receive approximately $660,632 in revenue.”

While it is interesting to learn that the County is experiencing a new stream of revenue, the source of that revenue is alarming.  While foreclosures are already on the rise, economists are warning us about the “shadow inventory” that exists across the country.  This refers to homes that are not yet in foreclosure, but are on the verge of being in that category.  Economists tell us the size of the shadow inventory is significant.  Do homeowners who can no longer keep up with their mortgage payments, and live in a home that may be worth less than they paid for it, have options?  Using the two favorite words of attorneys, it depends.  A qualified professional can provide counsel as to whether or not an owner is a candidate for a short sale.

 A short sale involves the sale of a property for an amount less than what is owed on the mortgage and other recorded encumbrances.  Typically, a short sale is only possible when the lender is willing to accept less than what is owed in exchange for a release of its mortgage.  Lenders and other creditors may be willing to do this rather than going through with a foreclosure as a short sale may take less time, net the lender as much money as they anticipate in a foreclosure, and the process is less complicated.  It is important to note that the lender may still elect to hold their borrower responsible for the shortfall.  If you considering a short sale, I cannot stress enough the importance of engaging the services of a qualified Realtor and attorney as soon as possible to determine if a short sale is a viable option for you.