The number of homes approaching foreclosure in Pasadena is approaching 700 and has been steadily rising for the past several months. As the moratoriums on foreclosures comes to an end, as homeowners exhaust all possibilities to keep their homes, it seems inevitable that the foreclosure rate will keep rising and rising for some time.

If there is a silver lining to all of this the foreclosure process has overwhelmed the lenders that own the notes and there isn’t enough manpower to expedite all of these in a timely manner. The net result being is that people are usually allowed more time in there homes and in some cases much more time.

Having a “Notice of Default” posted on your door even though you have been expecting it can be a stressful and embarrassing event. At this point you have to decide what course of action you are going to pursue. Many homeowners don’t realize the number of options they have at this point or the consequences that will follow their actions or inaction’s for the next couple of years or the rest of their lives.

You Must Attempt to Avoid Foreclosure

The last thing you want on your credit record is a FORECLOSURE. It will be an albatross around your neck, it will be the equivalent of the scarlet letter. A foreclosure will most likely be a major deterrent to any employer and could very well prohibit your chances of a promotion. If you have a security clearance, a foreclosure may provide irreparable damage.

Now that we have an understanding, what are the best options available to you?

By now, if you have missed a few house payment’s you definitely have the attention of your lender. Find out if you qualify for a loan modification. I have heard of some lenders cutting the interest rate up to 2 points and extending the term of the loan for 40 years in an attempt to make it more affordable for the owners. Maybe a forbearance program can be negotiated, whereby the lender agrees to a major reduction in your payment for a certain time. In most of these programs I have heard about, I am not aware of any principal being written off. Not to say they don’t exist, I am just unaware of it. In many cases the amount you owe or the amount being modified is just added to the back end of you loan. You’re still paying what you have missed, it just now could be over a longer period or amortization.

A Short Sale Can be a Win Win

If you lender is unwilling to renegotiate the terms of your loan, then it may be time to explore a short sale. Mention a short sale to many real estate agents and they will turn and run. Why, because short sales are more time intensive and all of an agents effort may be for naught if the bank is unwilling to approve the sale. Many agents have never done a short sale therefore the learning curve can be long.

Yes, they can be time intensive, and the paperwork necessary to complete the transaction can stuff a filing cabinet. Like most things there is a procedure and a set of steps to follow that can increase the effectiveness and success of your home being approved for a short sale.

The advantages are many. It is much less likely to cause the severe damage to your credit file like a foreclosure would. The term “short sale” is probably not going to show up in your credit report and it is quite possible that an entry such as “settled in full” will be the only explanation.

Many banks are much more agreeable to doing short sales these days. Believe me, banks do not want your house back. They would much rather sale what has now become a non performing asset and get it off of their books. The other nice thing about this process is you , the homeowner are in charge of the process. You will decide which offer to accept and present to the bank. While the bank will make the final decision as to the price, you have most of the decision making up to that point.

If you decide to investigate the possibilities of a short sale, speak to an agent who has earned the “Certified Distressed Property Expert” designation. This is not the time to be providing on the job training to an inexperienced agent.