REB 132: Don't Foreclose! You Have Options!!

Bankruptcy or otherwise hard financial times can cause hopelessness.  Few things leave a person feeling more hopeless than having their home taken from them.  Foreclosure, however, does not have to be the answer.  There may be options to avoid this or even to stay in your home.

Transcript

SPEAKER_00 0:00

Welcome back to real estate bites. This is episode 132. Uh, thank you guys for joining me once again. Today's topic is foreclosure and the fact that most people probably go through it and lose their home without really needing to, and wanted to talk about the options that you have. So this comes about uh for twofold reasons. I, you know, I recently worked with a lady who had some a series of unfortunate events in her home life or family life, and her home went into foreclosure, and she called me at the very last minute, literally days before the sheriff sale, asking if there was anything that could be done. And by then it was too late, and it's heartbreaking because this woman had so many options at her disposal that she could have pursued and exercised, but she waited too long, and it was pride, and she admitted it. And it just man, that's tough. That's tough. And so I think about that. I also think about how difficult it's getting for some people to stay afloat in in these economic times. We've got a lot of inflation, it can prices continue to go up on things, especially in housing. Housing itself is very, very difficult for people, whether you're owning and or whether you're renting, uh, it's very expensive. We live in a high cost environment, and it's just it's difficult for people, and I think it's going to get more difficult for people. And uh for some of those folks, you might end up uh hitting some some bumps in the road that causes some real economic stress. And if you're having a hard time paying for your home, there's options. So I brought my friend Jay Sloan from American Eagle Orgage on to talk about it. Let's bring him in. I wanted to talk to you about alternatives to foreclosure. I recently worked with um a lady who, you know, she came to me and it was way too late, and and we couldn't help because it was way too late. But there are things that people can do prior to the whole foreclosure process and even during the foreclosure process, uh tell obviously, you know, listing your house in the market and selling it is one thing, but there are ways that they can communicate with their lender, right? And and not even end up going into foreclosure, especially if they if all they need to do is get some extra time to get their act together. And I really just wanted to talk to you about that stuff. So, you know, I have my little list here. I don't know if if you've made one, but you know, loan modification. Have you worked with loan modifications and and and restructuring of a loan?

SPEAKER_01 2:50

Yes. Um, I have I I haven't, but I've see all this stuff that you're talking about, though, that we're probably gonna talk about today is gonna be on the servicing side of the lender. Okay. Okay. So for bearance agreements, modifications, um, all of those are gonna be on the you know, on the servicing side. So that's why it's very important for let the whatever lender you choose. Everybody's like, oh, well, you know, it's the best rate, it's the best. Well, you also need lenders to make sure that if anything ever happens, you have options if things aren't aren't going perfect. Um, you know, and all lenders are not created equal, you know what I mean?

SPEAKER_00 3:28

So so so, real quick, Jay, in saying that, uh, if a buyer is shopping for a rate, right? Because that's what they do, they shop for rates. How do they what questions can a buyer ask, or or how can a buyer qualify a lender to know that the service options that are available to them are what they really need in the long term to feel protected, to feel safe, or to feel like they have options. How do they vet that out?

SPEAKER_01 3:56

Well, you know, one of the things that they can ask too is like, is my loan going to be sold? Um, you know, brokers, you know, all always sell their loans, and they just want to make sure that they have a servicing platform where they can reach out, that people are gonna actually, you know, um respond, you know, because most forbearance and modification programs are just based on a simple formula of, you know, how how in trouble are you? Uh is it permanent? Is it short term, right? And then the lender will decide, like, hey, what are we gonna do to help you? You know, or what can what options can we because the lender lenders don't want your house, okay? Let's let's put that out there. Lenders do not want to be landlords, they're in this for the investment for you to pay back interest long term. They are not in this to be landlords and manage properties at all. It's very bad when when a foreclosure happens on the lender side, okay? They lose money all over the place. Um, PMI does help to a degree, but then that still is a whole trickle-down effect that we don't have time to get into. But the point is that when they're vetting a lender, one of the first things they should ask is, you know, is my loan going to be sold? So now that we're with American Eagle, loans are not sold. You know, is your certain is the is the are they gonna be responsive to things? Um, you know, how can I make my payments? Figuring out all of these other ancillary things is gonna let you know what type of service you have. Like if you just have to mail in your payments, that's a bad sign, you know, because then they don't have much of a servicing platform, is my point. So if they don't have much of a servicing platform, how are they gonna be able to respond to you in your time of need?

SPEAKER_00 5:30

What does a solid servicing platform look like?

SPEAKER_01 5:32

Well, you should be able to pay over over the phone, online. You might even have a buyer portal, you might have an app. So, like, you know, technology has evolved so much since the housing crisis that you should have several options and visibility on your payment, your escrow balance, just what your, you know, your paperwork, all of those things in some type of form. Okay, whether it be a website, an application, on your phone, something like that. Now, if you know you still have a lender that's in the dark ages that you really haven't ever heard of, that you're gonna have to mail in your payment or just pay by phone, that's not really a good sign that you're gonna get help if you ever fall behind on your payment, is my point that I was trying to make. Okay. Okay. So, like, that's a great way to event. So, are you gonna service my mortgage? What type of payment options do I have? And then you're gonna be able to probably gauge responsiveness. Okay. So, first I wanna I wanna kind of I think we should start a one specific point is that there is not a housing crisis for foreclosures right now. Okay, so like just to give you an idea, so foreclosure ratings are up, yes, specifically on VA and FHA financing, and it's up 26%, which is not a little bit, that's quite a bit in Q1 of this year versus Q1 of 2025. Okay, so that's huge. It's up 28% overall for the entire year versus 2025. And another thing is the top five states, just so you can understand of like what they what's going on right now. So, like one out of every 31 homes are in foreclosure. That's that's not terrible, but it's not also good, right? So one out of every 31 homes, it's not good. So, but the top five states that are that are not doing well are Indiana, one out of 2100, South Carolina is one out of every 1900, Florida is one out of every 2100, New Jersey is 2200, um, Illinois is one out of every 2200, and Ohio is roughly right about one out of 230 to 2400 right now. So we're it's not great, but just to give you an idea about 2008, guess how many homes one out of you know, every house out of all the households, how many were in foreclosure?

SPEAKER_00 7:41

Real quick, when you started this, I thought you said one out of 31 houses were in foreclosure.

SPEAKER_01 7:46

3100, 3100, 3100. No, no. We would do no, we would be in, yeah. We wouldn't we wouldn't be on this podcast right now.

SPEAKER_00 7:55

During the uh during the uh the the the great financial crisis, what one out of 1500 thousand? Five hundred. All right, I'm gonna stop guessing.

SPEAKER_01 8:08

One out of fifty-four.

SPEAKER_00 8:09

That's crazy.

SPEAKER_01 8:11

That's crazy. One out of fifty people were in foreclosure in 2018. We're starting foreclosure proceedings. So when people say that are out there, the the the streamers and the people who try to cause like a you know, stir up stuff, we are not even close to anything of that type of crash. That was like a once-in-a-lifetime, hopefully, crash, right? So, but since then they've gotten a lot smarter because back then, the reason there was also so many issues is to that's why I wanted to parlay into this segue into this topic is I wanted to say that first because they've got, you know, it has gotten better as far as help for people. So the reason one out of 54 homes foreclosed, they didn't have options. It was either catch up on your six months of mortgage payments, man, or we're gonna foreclose on your house. There was no modifications, there was no forbearance agreements. So a modification is is like a long-term change in your note. Okay. So what it what happens in a modification is that, like, let's say you lose your job or you become disabled. That's a permanent situation that you can't get out of or you can't correct right away, right? So it's a change in your note. So what they'll do is they'll say, okay, John, we know that you lost your job, you can't go back to work for a year, you were injured, whatever. You know, you submit your disability paperwork or whatever happened or proof of you know what's happening. Then they'll work it out with you, whether they'll take a portion or a chunk of your balance, put it as a silent second on your mortgage, okay? So let's say you owe 200,000. They might take 100,000 or 50,000 and put it on the back end of your on your title. So they'll still get paid if you sell or refinance, okay? But they'll put that, so then your mortgage payment is now based on 100,000 instead of 200,000. That's an example of a modification. That's a change in your note that's long term that's meant to help you. Um, so companies are doing that, you know. And one thing that I would advise to anybody who's tuning in or listening is that if you have anything like that, make sure you're talking to your lender and your realtor about it. Because a lot of the times, like let's say they're going to sell their house and this stuff happened back in 2010 and it's 15, 16 years later, these people are selling their houses, right? They forget that they even did it. You know?

SPEAKER_00 10:29

Yeah.

SPEAKER_01 10:29

And sometimes, like I just have a clo I have a closing on Monday where a client did it back in 2009 to save her property. She owed an extra $25,000 that wasn't on any of the net net seller sheets. It wasn't, and she's using the equity from her current house to buy her house that she's purchasing, right? So, but guess what? She was almost short to close. She thought she was gonna walk with almost 30,000, but because of that modification agreement that she had from almost 20 years ago, from roughly 20, almost 20 years ago, she um she now had to pay that money back because it was on her title. So it's they're great when you need them, but they do exist and they do really, really help people.

SPEAKER_00 11:12

Um so, real quick on that, Jay, if somebody found themselves in a financial pickle and they use a loan modification, and the lender takes a chunk of the note, puts it on the back end on the title, let's say they get their situation squared away and they're making, you know, decent money again, and and and they're able to pay their bills on time and they're living more comfortably. How do they satisfy that loan modification? Can you then go ahead and maybe refinance it or something and get into a more traditional note? Is that the way you remedy that?

SPEAKER_01 11:48

Yep. And there's also there's something called a forbearance. So a forbearance agreement is short term. So let's say you're just down on your luck for the moment, some things have happened out of your control or in your control that have caused a financial hardship. Um, you can actually do a forbearance, which is like a much shorter term. It's like a six to 12 month fix. And in that situation, you know, what they'll do is they'll give you, you know, um a short-term rate. So let's say they'll they'll make a short-term change. They won't change your note, like a modification, or I'm sorry, yeah, modification, but they'll they'll allow you to um, you know, let's say make interest-only payments, you know, or for the next six to twelve months, you know, lowering your payment three or four hundred dollars or what have you. And then if you still forbearance is not, isn't enough, that's when you go into the modification. But yeah, you can refinance out of any of these things. They, you know, your lender, the lenders there to try to help you. Um, and a lot of them could still be sitting on COVID money that they never use for the modifications that they thought they were gonna have to do, you know. So a lot of people took the opportunities back then to, you know, which I refinanced a lot of people out of that. We saw a lot of payoffs when people were selling their properties that would tack on six to twelve months and have no payments even for six to twelve months, and then they tacked the principal and interest payments on the back end of their note.

SPEAKER_00 13:14

So that's that's a forbearance, right? That you yeah, you need to refinance people into that.

SPEAKER_01 13:19

Yeah. Um, no, I don't re I don't do any of these things. So, mortgage companies, it's all with your servicing lender. So, but though that that wasn't just it, I was just giving an example of like they could defer six to twelve mortgage payments to the back end of their balance. Yes, yeah, you don't pay any principal, but you're also not making any payments and just not having six to twelve months of mortgage payments. I mean, if you really think about it, how many people could that have saved in 2008? You know, it could have just let people get back on their feet, you know. Um, but we didn't we didn't do any of that.

SPEAKER_00 13:54

So, I mean, I think what people really need to understand out there is if you start to get into a little bit of financial trouble and you're having a hard time paying your mortgage, even if it looks like you might have a hard time paying your mortgage in the near future, that is the time to get a hold of your agent, get a hold of your loan officer, right? Um, and start asking questions about what options you have to do a loan modification or forbearance or some sort of restructuring of the loan to the note, or maybe it's a refinance, right? That could get you out of deep water. Maybe if if rates have improved and you just extend the note out, you know, if you're 15, 20 years into a note and you extend it out another 30, but because rates have improved, um, you can bring down that monthly payment, and that might be might be enough to get you out of hot water, right? Yeah.

SPEAKER_01 14:46

I mean, there's just there, there's just a lot for people to take advantage of that there there just wasn't before. So if you don't don't just think like, hey, I just have to stop making mortgage payments and they could come take my house. I don't want it anymore. Don't do that. It it's not good for your credit forever. First of all, it's gonna be on your credit for at least seven years, okay? It's gonna highly affect the products and the things that you qualify for moving forward, which is not good. Um, and it's gonna it's gonna affect your life in other ways. And then now you're entering back into a very uncertain, very volatile rental market, you know. And I heard the auditor was just at, you know, um the speaking at a low-car uh meeting yesterday, and he was talking about they're gonna be taking away the business credits by 2029 for investment housing in Lorraine County, okay? And they're gonna pass that on to homeowners, okay, which is which is a good thing. However, when that business credit disappears and all the taxes rise, what's gonna happen to rent, John, with you being an investor?

SPEAKER_00 15:52

Yeah, it's gonna go up. I mean, that we're gonna pass that along to the end consumer, like everything that ever happens when taxes, tariffs, blah, blah, blah hits the marketplace, it all gets passed on to the end user.

SPEAKER_01 16:03

It all increases somewhere, right? So you don't just think like, okay, I'm just gonna give up this house and it's gonna be easy to do a rental. Well, you know, you're I'm I'm putting people in houses right now that their their rent is five or six hundred dollars more than the mortgage I'm doing for them. Sure. It's like I'm refinancing them with a purchase. It's pretty crazy. So don't assume that things are better on the other side on the real estate end of renting versus keeping your house, figuring it out. Like Jonathan, Jonathan said, call your lender, call your realtor, discuss options. Let's help you. I help people at least once, you know, a quarter or so go through this, unfortunately, because things happen to families and there's nothing we could, you know, that they weren't, you know, prepared for. And I help them navigate some type of process.

SPEAKER_00 16:49

Yeah, I I mean, I personally have not heard or seen anything um regarding any sort of foreclosure crisis in the country. But what I do know is it's getting difficult for a lot of people out there, and it's going to get more difficult, I believe, because I don't see the cost of anything, let alone housing. I don't see the cost of anything coming down anytime soon. Um, you know, and and housing, I mean, we we have all-time low demand right now, you know. I I mean, you're just seeing it in the numbers, but the home prices are not coming down uh because there's still all-time low inventory, and the cost of everything keeps going up. So not only is it the cost of the home itself that is at least staying flat, it's certainly not seeming too correct very much. And I think it's going to start creeping up again here as the selling season really gets going. Uh, but insurance costs more property taxes continue to go up, even even if there's stuff in the legislature about you know getting rid of property taxes. Um I can't help but think that that's just politicians trying to win votes. Uh, because in the end, too many communities, too many school districts need the property taxes to function. You know, I mean, we just had this sweeping property tax increase across, you know, certainly the county, if not the state, as counties do their reassessment on property values and property taxes spiked back up after all of this price depreciation and home values, right? And still school districts, after getting these windfalls of millions of dollars, are still going out for levies and still, you know, laying off staff because for whatever reason their budgets are out of whack. Uh, so the whole point is it's not getting cheaper for anybody. Wages are not following um inflation, and and it's just getting harder. And there are people out there who are struggling to make ends meet. And instead of having to forfeit your home and the equity that you might have built in there, there are options for you. And do not wait, do not be too proud to go and call people and tell them that you are in a bit of a pinch and and ask for help because there are options out there, and there's those help for you and your family to stay in your home. And uh that's that's all I really want to discuss today. Uh, you know, again, I I worked with that woman very recently. It was it was a shame. I mean, she she had lost her husband and then she had uh lost her job, and now she was in a pinch and she had a ton of equity in this home, but she waited out of pride, waited far too long. I mean, far, you know, the the lender had already initiated the foreclosure process, it was already set to go to auction, and you know, it was it was like a week prior to auction that she called me, and uh it was just too late, and it was just a shame because had she reached out well before, I mean, you know, you're talking about the foreclosure process, it takes months, Jay, right? It's it doesn't happen overnight, it takes time to go through that whole process. And had she have called before that process even began, I'm certain somebody could have helped her out and and found a situation where she did not have to leave her home. Um, and uh you know, and even if she did, even if the even if the solution was to sell, she would have gotten all that equity out. Oh man, it's just it's heartbreaking. So you don't have to do that, folks.

SPEAKER_01 20:15

Yes, you do not. And you know, just to add to that, um, you know, you're you have a great sphere of investors, so do I. Like, you know, there's a ton of different people that can step in and just literally buy your house and you can walk away with something. And that's one thing that's different between today, also in 2008, and everybody talks about it, is people are sitting on the most equity they ever have in in history. Right. So do not, you know, for your example, do not wait too long because you have options. You just need to talk to your trusted local experts, and we will definitely help.

SPEAKER_00 20:49

It's the truth. Hey, man, I appreciate you coming on once again. Jay Sloan of American Eagle Mortgage. Thank you so much, dude.

SPEAKER_01 20:55

You got it. Talk to you later, brother.

SPEAKER_00 20:57

All right, man. Thank you. That was Jay coming on again, educating us about certain things in the mortgage world. Appreciate you coming on as every time, uh, my friend. Hey, that uh that wraps up the topic of the day. When it comes to the stat lines, there's one statistic I want to show you guys and one only. I'm not going to go through the whole line again, but I definitely want to show you this because you know, as we just talked about in that uh in that segment there with Jay and talking about appreciation and inflation and whatnot. Take a look here, column G. This is where I track median square foot values. The square foot value for the the median square foot value for the 57 closings last week here in Lorraine County was $190.66 per square foot. Folks, that's that's an all-time high here in Lorraine County. Um I started tracking this stuff. Well, this is episode 132. Uh, looks like column 140. So I've got 141. Weeks of tracking. All right. That's uh, you know, we're closing. That's two and a half years of tracking these numbers. And these are the two and a half years of the highest prices we've ever seen here in housing. $190.66 per square foot is the highest number that I've entered into that column since I started tracking these stats weekly two and a half years ago. So that's an all-time high in median square foot value. Uh now, obviously, next week's median square foot value could be $160 a square foot. But the point being, you know, I thought we were going to see this massive correction from Q4. You know, we saw a large correction from Q3 to Q4 of 2025. I thought we were going to see another one. We didn't, it actually increased a little bit, um, not even a dollar, a little bit. Uh, and and we're starting to see this again here. We we start right off here. First three weeks of Q2 2026. We're at 175, 174, and then 190. Uh, is this trend going to continue? We'll see. But that was all I wanted to share when it came to statistics on the sales that happened last week. Thank you guys for joining me once again. That's a wrap on REB132. Uh, as always, take care of yourselves, take care of one another. I love you, people. I'll see you next week.