On Tuesday, we discussed the details of the new Fannie Mae and Freddie Mac offering that becomes effective on March 1, 2013: both Fannie Mae and Freddie Mac will begin taking Deeds in Lieu of Foreclosure for mortgages guaranteed by their programs that are underwater and where the home owners are current on their mortgage payments.
For those Florida home owners who have continued to make that monthly mortgage payment as a matter of honor, even though the market value of the property was much less than the mortgage balance, this may sound like an answered prayer. Or the cavalry arriving. Or maybe their Fairy Godmother waving a magic wand, just another fairy tale ….
Five Things For Florida Home Owners To Know About the New Deed in Lieu Underwater Mortgage Bailout Offer From Freddie Mac and Fannie Mae
Florida home owners who pay their mortgage payment even though there are those that would walk away from that note do so for reasons everyone should respect: they love their home. They think a deal’s a deal. It’s more than money: it’s honor, it’s integrity, it’s holding on to the family homestead, where the kids grew up and where it feels like a home. Not just a house, a home. Florida Pride.
For some of these folk, it has been tough going to keep up that house payment. Maybe someone is sick or someone lost their job. A spouse passed away. For these people, the Deed in Lieu Offer for Underwater Mortgages that gears up in a few weeks sounds tempting. Here’s five things to think about:
1. This is only for those that can establish an approved hardship through documentation. A death certificate for a spouse who has passed; an employer that has required the family wage earner to relocate; etc. — you will have to have paperwork detailing your private circumstances to attach to your federal application.
2. The federal agency may ask that you fork over cash, a significant amount of money, to get the deal of foregoing the deficiency on the house and walking away after agreeing to the Deed In Lieu. That amount? As much as Twenty Percent (20%) of your personal assets. Thankfully, retirement accounts are excluded. So, if you are facing long term health care costs, it’s something to consider here — how does this impact your future, financially? Why do they want it? They want it to pay down a part of that deficiency between the home value and the home loan.
3. Some folk will be able to rent their home back from the lender after the Deed In Lieu deal is done. The amount of that rent payment should be negotiated with the lender, but there’s no detailed requirements on that here. Others will be asked to hand over the keys and leave the property.
4. If you do leave the home, there are some conditions where you may get relocation expenses covered, at least some of them. You also will be required to leave the property clean, neat, and in good condition — and you need to take all of your stuff with you. Don’t forget to clear out the attic, the storeroom, the high shelves in the garage.
5. Some people are going to be asked to sign a note (no interest) to pay off the deficiency between the home loan and the home value. Not everyone will be able to walk away from the house with part of the deficiency being forgiven.
Larry Tolchinsky’s Tip: For some people, this will work. However, each person has their own story to tell and what may be a good thing for your friend down the street isn’t going to work for you and your family. Once again, it’s a word to the wise to get some perspective from a Florida real estate lawyer who has been working with local banks in foreclosures, short sales, and loan modifications. Maybe the Deed in Lieu works for you – but maybe your bank’s modification of the mortgage and you staying put without a mark on your credit score is a better road to take.
Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at firstname.lastname@example.org, or (954) 458-8655. If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments. He’s happy to take your call.