What You Need To Know About Foreclosure Bailout
This can sound like the very thing you’ve been waiting for: relief from mortgage payments and a chance to stay in your home. Like most things of this nature, if it seems too good to be true, it probably is.
If you are even thinking of considering a foreclosure bailout it is essential that you get some professional guidance.
Unfortunately, many people who work in this industry prey on the desperation of their clients and run scam after scam.
The idea is that the company will buy your house from you and then in a year’s time, when you’ve managed to get your finances in order, you can buy it back from them. It sounds good in theory but let’s have a look at the numbers.
Let’s say, for example, that your house is worth $300,000 and you still owe $160,000 on your mortgage. Rather than purchase your home for fair market value, the foreclosure bailout firms will buy it for $160,000, which is essentially just buying your mortgage. You are able to stay in your home by paying the company a grant (rent) each month.
In a year’s time, you can buy back your house from the company but you can be sure it will be for something far closer to fair market value than the $160,000 they paid for it.
It may surprise you to hear that ninety percent of the time, the houses the original owner cannot afford to repurchase the house. What this means in real terms is that they have thrown away the $140,000 in equity they worked so hard to gain before things went wrong.
My advice would be to seriously consider all other options before you decide to get a foreclosure
bailout.
Give me a call on 800 653 2864 or write to me and set up an appointment for a FREE financial analysis. It’s a one hour, no-strings-attached conversation where we look at your current situation and find the best solution for you and your family.
Dave Sanford | Oct 26, 2008 | Reply
My concern is that the economy will stay bad until there is liquidity in the housing market.
Most of the proposals I see to address that try to help people keep prices at the last sale value
which is artificially inflating prices over the current market clearing amount. The Economist
had an article on this:
http://www.economist.com/finance/displaystory.cfm?story_id=12470547
which cites Luigi Zingales - Plan B paper.
http://faculty.chicagogsb.edu/luigi.zingales/research/PSpapers/plan_b.pdf
It not only has a proposal based on things that have been done before, to avoid foreclosures
while lowering house prices to the market rate, but also addresses the connectivity risk
between banks and other financial institutions.
Anyone interested in thinking carefully about future economic policy should read Zingales’ Plan B paper.