1. The Foreclosure Crisis: Saving your American Dream

2. What is foreclosure? If you have a mortgage on your home and fall behind in payment (usually after 3 months), the bank or lender has a legal right to take over your home. This means you will need to move, and it may also affect your credit score.

3. What if I can’t make my mortgage payment? Talk to your lender, explain the circumstances. Ask for the “Loss Mitigation Specialist”. Know your options: Contact Muncie Homeowner and Development Center 111 E. Adams St. 282-6656 Other HUD-approved counseling centers can be found at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?&webL istAction=search&searchstate=IN or by call 1-800-877- 8339 http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?&webL istAction=search&searchstate=IN

4. Other tips: Keep the letters from your lender—ignoring them won’t make the problem go away! Don’t fall for scams—avoid counseling companies that charge or others that offer to help you sell your home. Stay in your home until after the foreclosure. Find more info at http://portal.hud.gov/hudportal/documents/hu ddoc?id=fha_saveyourhome.pdf http://portal.hud.gov/hudportal/documents/hu ddoc?id=fha_saveyourhome.pdf

5. I’ve received a notice of foreclosure— what happens next? In Indiana, you have to right to request a mortgage settlement with your lender. At the settlement conference you will meet with a representative from the lender to discuss alternatives to foreclosure. For detailed information about the process go to www.877gethope.org or call 1-877-GET-HOPE www.877gethope.org

6. If you want to stay in your home, some options may include: Forbearance—the lender agrees to suspend or lower payments for a set amount of time. Loan Modification—payments are lowered due to less interest or a longer loan period. Repayment

7. If you decide not to keep your home, these options may exist: Short sale—you sell your house for less than what is owed to the lender Deed in lieu of Foreclosure—the house is given back to the lender. More information about options can be found at www.in.gov/judiciary/selfservice/2359.htm

8. If no settlement is reached, what is the legal process involved in foreclosure? The lender will file for foreclosure with the court. The court will hold a trial—you will have an opportunity of file an “answer” in the case, otherwise you will lose by default without a hearing. If the court rules for foreclosure, you will be evicted from the house. For more information or to find legal help, go to Indiana Legal Services www.indianajustice.org,www.indianajustice.org

9. The Foreclosure Crisis: Saving your American Dream

10. How do I find foreclosed properties? There are several ways to locate listings of foreclosures, also know as “distressed properties.” Private companies collect foreclosure listings from lenders such as banks, mortgage brokers, corporate sellers, and government agencies, then list them on the Internet.

11. Where Do I Look? Private foreclosure listing sites: www.foreclosure.comwww.foreclosure.com/ www.realtytrac.com/home/ www.bankforeclosuressale.com/list/indiana.html www.foreclosurefreesearch.com/ Most foreclosures databases are searchable by state, city, zip code, and price. Some are searchable by a property’s status, eg. pre-foreclosure, foreclosure, auction, bankruptcy, short sale, or sheriff’s sale. They also are a source of foreclosure statistics.

12. Where Do I Look? Government-owned properties also can be searched on many of these databases. Agencies such as HUD (Housing and Urban Development), VA (Veterans’ Administration), IRS (Internal Revenue Service), Fannie Mae, and Freddie Mac typically have repossessed properties available. Search government-owned properties at homesales.gov/homesales/mainAction.do. homesales.gov/homesales/mainAction.do Search Fannie Mae at www.homepath.com/.www.homepath.com/ Search Freddie Mac at homesteps.com/featuresearch.html.homesteps.com/featuresearch.html Search the IRS at www.treasury.gov/auctions/irs/cat_Real7.htm. www.treasury.gov/auctions/irs/cat_Real7.htm

13. What are different types of “distressed properties”? Pre-foreclosures: Properties still owned by borrowers who are in default. Auction properties: Properties offered in a public auction sale, where the new owner pays in full and takes immediate possession. Real Estate-Owned (REO): Properties still owned by a bank or other lender after an unsuccessful auction sale. Federally-insured properties: Some loans are backed by the government (eg. VA, HUD, Fannie Mae). These agencies reimburse the lender, then market the property through public sales or contractors.

14. What’s a “short sale”? In a short sale, the owner of a distressed property can avoid going through foreclosure when a third party buyer negotiates directly with the lender for a sale at a price below the amount actually owed on the property. In other words, the lender agrees to take a loss in order to get rid of the property. The new buyer will likely bargain with the lender in a series of offers/counteroffers until a price is determined.

15. What’s the buying process? Click through this handy tutorial to get an overview of the buying process for pre-foreclosures, auction sales, and REO’s. http://www.realtytrac.com/foreclosure/how-to-buy- foreclosures.html

16. Pitfalls in buying distressed properties Properties are sold “as is.” The buyer will be responsible for updates or repairs and should review the property with an inspector or contractor. Run the numbers with a Renovation Calculator: cgi.money.cnn.com/tools/renovation/renovation.html cgi.money.cnn.com/tools/renovation/renovation.html The buyer must secure their own financing prior to purchase and must know how the funds will change hands (eg. cash, cashier’s check, etc.). A pre-foreclosure property retains all debts (eg. loans, mortgages, liens, judgments, etc.), which must be paid off. The buyer must investigate the property’s history to understand its financial obligations.

17. More pitfalls A buyer for a pre-foreclosure property must negotiate with all the people named on the title. All must be in agreement for a final contract to be signed. The buyer must check recent sales prices for comparable properties before entering into a sales contract to avoid paying a price above the property’s market value. Buy title insurance to protect against title defects that "cloud title“, or cast uncertainty on the buyer's ownership rights, such as undiscovered liens, forged signatures or defects in documentation.

18. Find a broker or realtor A real estate professional may be helpful in successfully purchase a distressed property. Real estate agents with additional training and certifications can become a Realtor©, broker, or other designations. Use the Find a REALTOR function at www.realtor.com/realestateagents/www.realtor.com/realestateagents/ to locate a local professional or real estate company.

19. Find a real estate attorney A real estate attorney can help negotiate with owners or lenders and clarify procedural or title concerns associated with distressed properties. Contact the Muncie Bar Association at www.inbar.org/LocalBars/DelawareMuncie/tabid/172/Default.as px. The I Want To Find a Lawyer tool at www.martindale.com/ also can locate a local attorney. In the Practice Area box, choose “Real Estate”. www.inbar.org/LocalBars/DelawareMuncie/tabid/172/Default.as pxwww.martindale.com/

20. Find a house inspector A professional inspection of a distressed property before purchase may reveal unexpected defects that affect the marketability of the property and the price you should offer. Ask friends, business associates, or your real estate professional to recommend a reputable inspector in your area, or consult the American Society of House Inspectors website at www.ashi.org/find/default.aspx.www.ashi.org/find/default.aspx

21. Federal Mortgage Settlement In response to widespread industry misconduct and its role in the foreclosure crisis, this settlement mandates five major mortgage servicers to reform mortgage loan practices and provide relief for struggling homeowners. Ally/GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo are affected. All state except Oklahoma are parties in the settlement.

22. Relief for Struggling Homeowners. Assist borrowers in default or at risk of default through principal reduction, assistance in short sales, or unemployed payment forebearance. Refinancing of Underwater Homes. Banks must notify borrowers of refinancing programs. Eligibility restrictions apply. Mortgage Servicing Reforms. New guidelines prohibit robo-signing and “dual tracking” (where banks pursue foreclosure while simultaneously engaging the borrower in loss mitigation). They also mandate loss mitigation discussion and fair response times to borrowers. Monitoring and Enforcement. An independent Monitor will oversee banks’ compliance and report to the attorneys general. Violations will be subject to civil penalties of up to $5 million. Payments to Foreclosure Victims. Borrowers who were improperly foreclosed upon or not offered loss mitigation may claim a $2,000 payment and are free to pursue additional claims in court. Release of Claims. Named bank parties are released of claims brought by attorneys general or federal banking regulators. Key Terms of the Mortgage Settlement