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San Francisco Bay Area Short Sale – Short Sales & Avoiding Foreclosure
Options To Foreclosure
A Special Report
 
Courtesy of San Francisco Bay Area Short Salewww.sfbayareashortsale.com
 
San Francisco Bay Area Short Sale – Short Sales & Avoiding Foreclosure
Introduction to the Foreclosure Market
In order to have an accurate understanding of short sales, it is important to firstunderstand the market environment that has brought on the short sale boom.Towards the end of the 1990’s, competitive pressures in the real estate industryand mortgage market gave way to high-risk lending practices of previously unseenproportions. In particular, subprime lenders began to accept loan applications fromborrowers with poor credit. Adjustable Rate Mortgages (ARMs) became popular options for home buyers who could not truly afford ahome loanin the long run. Buyerswere borrowing funds from lenders under the assumption that home values wouldcontinue to appreciate, and they would be able to refinance their homes into moreaffordable rates in the future. But when inflated home prices began to decline in2006-2007, and the time came for ARM rates to adjust to the current market rates,many homeowners found that they could not refinance their loans. Mortgagedelinquencies skyrocketed, and the mortgage backed securities (supposedly “safe”bond-like securities that many large investors, national and international, invested in)lost their value. This fueled a national economic crisis that spread across the world.Without the option to refinance into an affordable loan program, manyhomeowners began to lose their homes to foreclosure. Lenders became inundated withrepossessed properties and had to quickly expand their Loss Mitigation and ForeclosureDepartments and come up with policies to manage the foreclosure activity. With thedecline of home values, as well as the high costs associated with carrying outforeclosures, lenders faced enormous losses even as they attempted to resell therepossessed properties. The Loss Mitigation Departments began a high-intensity effortto workout foreclosure prevention options with homeowners. Such options includedloan forbearance,loan modification, andshort sale.
 
San Francisco Bay Area Short Sale – Short Sales & Avoiding ForeclosureAs lenders had to get rid of the properties quickly, they were generally acceptingpurchase offers at discounts, sometimes as much as 20% below market value. And asthese bank-owned and short-sale properties increased in numbers, they began to setthe standard for market pricing, pushing values even lower. This downward spiraladded fuel to the mortgage crisis fire. But it also had the positive outcome of makinghomeownership an option to many who could not previously afford to buy a home.In the San Francisco Bay Area, the foreclosure boom has mostly affected theEast Bay, hitting cities like Richmond, Oakland, Hayward, and Fremont. But we arealso seeing many foreclosures in Daly City, San Bruno, and San Mateo. While theless-affluent areas are the most-affected, higher-end properties have begun to feel thepinch of the market as well. The market is truly indiscriminate in its effect on thepopulation.
Foreclosure: Dangers and Alternatives
There are many reasons why a homeowner might end up in a financial situationthat forces him into foreclosure. Reasons can include illness, unemployment, divorce,adjusted mortgage interest rate, etc.By almost any measure, a foreclosure is the most damaging event your creditstatus can encounter – arguably worse than bankruptcy. A foreclosure on your creditrecord will negatively impact your ability to borrow money for years. Foreclosure can becompleted in less than six months from the time the loan becomes delinquent. InCalifornia, a borrower must be two months delinquent before a lender can commence aforeclosure action by recording a Notice of Default (NOD). Once the NOD has beenrecorded, the foreclosure can be completed in less than four months.The best way to stop the foreclosure is to bring the loan current. To do that youwould need to pay all delinquent amounts as well as the fees incurred by the mortgage
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