As 2007 began, people were saying that the housing market will not decline too much, and what happens is only market œnormalization.   Those words are still ringing, and the huge market shift surprised everyone. In older more established areas there is a higher resistance to price dropping. Prices fell about 10% to 15%, compared to the emerging areas far away, where housing price fell 25% to even 35%. Many people who cannot pay the loans also cannot find buyers for their houses, and they end up in a miserable situation.   Who can help?

Some people are very concerned about saving-face, and have difficulty looking outward for help. Once they cannot pay their loan, they will swipe their credit cards, and soon the cards go over the limit. Because credit cards usually charge interest rate above 10%, this œdigging the east wall to repair the west wall method will likely bring both the east and west walls down. Some people seek help from relatives, but there is a saying of œemergency help cannot help poverty. Soon all friends and relatives will have one more name on their œblacklist. Some other people will try to work two or three jobs at the same time, and soon fall sick from exhaustion. Self-help is really not easy!

But does that mean you should just sit and wait until the house is foreclosed? Of course not! If your financial trouble is only temporary “ such as being temporary unemployed while switching to another job, being shortly away from receiving retirement pension, or waiting for immediate inheritance or other unexpected fortune “ then you may negotiate with the bank for a short period of reduced monthly payment. For example, when the monthly payment is $4,000, you may try to negotiate to pay $2,000 to $2,500 a month, with the amount reduced added to the loan capital. When you sell the house or refinance your loan in the future, you will make up this amount at once. Please remember the banks are not the charities, they will not offer you special “sympathy” and remove or reduce your loan interest. Temporary stretches are possible provided you have certain negotiation skills, and you must let the bank believe that your future financial stance will improve. Only then can you be spared temporarily to pass the present difficulty.

The second method is “giving it  back to the bank”. Since I can™t pay back the loan, and I don™t want to take advantage of others, then it must be okay to give up and transfer the ownership of the house to the bank. Not completely! The bank spends money to make money, if everybody who can™t pay interest give their house back to the bank, then the loan industry can change to “housing management”, not only do they earn no interest on the money they lend out, they also need to hire many people to manage real estate under their name. Therefore, banks fear this, especially since more and more houses are foreclosed now, so please let them off!

The third method is  short sale.  It works by putting the house on market and negotiating with the bank after finding a buyer. For example the house is bought in the past at $700,000 with $70,000 as down payment and $630,000 in loan, and the current selling price is now $600,000. Take out the $36,000 as selling expense, leaving $564,000 to repay the bank.   If the bank accepts a loss of $630,000 – $564,000 = $66,000, then the seller may clear up accounts with the bank, and transfer the house to the new buyer. Meanwhile lenders will be able to reclaim a reduced amount of their bad investment, and this makes a œwin-win situation.

Many borrowers fear that the bank will find them in the future to collect the unpaid amount on their loans. If your house is for your own occupancy, and the loan is the initial loan at the time of buying the house, then the chance for this to happen is miniscule. But if you have refinanced loan, or even worse you spent the hundreds of thousands of dollars that are taken out as refinanced loan, then you must prepare to write an article to œexplain clearly to the bank.

Short sale requires high marketing skills. In the previous wave, I had done many short sales, and most banks are willing to pay 6% commissions. This wave of “housing disasters” caused heavy losses for the loan and financial industry, and commissions have reduced to 5% or lower. Selling short is equivalent to selling with two sellers, one is the property™s owner, and the other is the loan creditor. The property™s owner generally has ambivalent feelings since he will not gain one cent on the sale, yet he is afraid that the bank will not agree, and is also afraid that the buyer will run out of patience and withdraw. Meanwhile he worries that he may not find a place to live after selling the house. Therefore the agent™s responsibility is great. In addition it requires a lot of patience and high negotiation skills, and the challenges differ with each case. Agents often spend more time on short sales than on normal real estate transactions, and they are afraid that if the bank rejects their offers, their client™s house will be foreclosed, leaving a bad credit score for ten years.

If you have trouble paying your loan, you should seek help from a real estate agent who has had successful short sale experience. Finding the wrong agent will not only make you lose your house, but also carry the bad reputation of œbank foreclosure on your credit. You must then pay cash everywhere in the US, a huge inconvenience! If you succeed in negotiating with the bank on short sale, your credit report will only show œSettled as Agreed.

If you have any problems with loan payment, please call my direct line: 626-912-8828. I™ll respect your privacy and assist you in solving the problem.