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WSJ Foreclosure Forestalled Article 3.8.13

WSJ Foreclosure Forestalled Article 3.8.13

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Published by Richard Vetstein
WSJ: Lenders Less Likely To Foreclose On Luxury Homes, Richard Vetstein Quoted
WSJ: Lenders Less Likely To Foreclose On Luxury Homes, Richard Vetstein Quoted

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Categories:Types, Business/Law
Published by: Richard Vetstein on Mar 08, 2013
Copyright:Attribution Non-commercial

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05/14/2014

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 Foreclosures, Forestalled
Owners of luxury properties who fall into arrears typicallyhave more time and options to keep their homes beforethey're repossessed 
By
ANNAMARIA ANDRIOTIS
 
When the owners of high-end homes fall way behind on their mortgage payments, foreclosure is not a foregone conclusion.
Cambridge Properties
Luxe Listing: This five-bedroom, four-bathroom home in Paradise Valley, Ariz., isin foreclosure and is on the market for $1.398 million.
 
Lenders can be more willing to craft a new payment plan tomake high-dollar homes more affordable. Paperwork andprocedures are also often delayed, keeping homeowners insome states in their homes for two or more years after they'vestopped making mortgage payments. And in some cases,lenders are offering homeowners tens of thousands of dollarsin cash in exchange for their agreeing to a short sale, in whicha home is sold for less than the borrower owes on themortgage.Repossession rates show the difference. Last year, roughly85% of homes worth up to $1 million that received defaultnotices were eventually repossessed, according toRealtyTrac, which tracks real-estate data. For homes worthmore than $1 million, about 28%, or around 1,400 homes,were repossessed.For lenders, it's worth theextra effort to avertforeclosure on luxuryproperties. They incur substantial expensesholding these homes,including paying propertytaxes, maintenance costsand, often, homeowners'fees. The homes are alsomore difficult to sell, sincefewer buyers can afford topurchase them. And whenlenders eventually unloadthem, it's often at a loss."Lenders have more of an incentive to work out payment plansfor these borrowers than with the ones [whose homes] maymove quickly," says Jon Maddux, co-founder of YouWalkAway.com, which helps borrowers, including luxuryhomeowners, in default or foreclosure.
 
 Alternative payment options will vary by lender but can includegetting a lower interest rate or extending the mortgagerepayment period to lower the monthly payments.Luxury homeowners often have more tools to delayforeclosure, says Daren Blomquist, vice president atRealtyTrac. These borrowers are more likely to hire lawyerswho will point out problems with how the loan was originallystructured, such as an inflated appraisal that resulted in alarger mortgage, and other technicalities.
"It's all aboutbuying time," says Richard Vetstein, a real-estate attorneyin Framingham, Mass.
 Separately, some lenders will encourage owners to consider ashort sale. Armando Tiongson Jr. of Rockaway, N.J., saysBank of America 
BAC -1.55%
recently offered him and his wifeup to $30,000 in cash to sell their 4,100-square-foot home,which they purchased for roughly $1 million in 2006, in a shortsale. Mr. Tiongson, an IT program manager, says he and hiswife haven't paid their mortgage in 18 months after themonthly payments on their loan, which initially required justinterest payments, spiked. By offering this cash in exchangefor a short sale, Bank of America says it can reduce the lossesthat would kick in if the loan goes to foreclosure. (The bankadds that it has been making such cash offers to homeownersof all loan levels since last year.)The Tiongsons are going to take the bank up on its offer andsell. "We are going in for the short sale mainly to avoidforeclosure," Mr. Tiongson says. "The cash option is really justa benefit."For their part, lenders say they try to offer repayment plansand modifications to all borrowers, regardless of the size of their loan. Some say the repayment options offered willdepend on what the investors currently holding that loan willpermit.

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