Beware of Mortgage Vultures: Subprime Defaults are Rising, Avoid Foreclosure with Loan Workouts

Many investors have been licking their chops awaiting the increases in default levels. Companies like “We Buy Ugly Houses” and others, prey on families who fall behind in their mortgage payments. With the hype behind subprime lending defaults, it will be more important than ever for borrowers to be on the look out for mortgage vultures.

How to Identify a Real Estate Vulture?

Real estate investors use a variety of tactics to get to your homes equity. The passive approaches are signs like “We pay cash for houses” or “Cash for your home.” Some more aggressive investors will literally call or stop by your home and ask if you are considering selling or if you are having financial troubles.

Investors win you over with promises of avoiding foreclosure and a quick cash settlement for your home. They may also talk about avoiding creditors, bankruptcy, or a hit to your credit score. What they don’t tell you is that they will be giving you 20% to 50% of your homes actual value. It is almost never advantageous for a homeowner to sell their home to these people.

Alternatives to Default and Foreclosure

Most consumers in these situations don’t know that they have alternatives. The first step is to get ahead of the problem. If you know you just lost your job or you have had an emergency outflow of cash, call your lender right away. Avoiding bills and credit calls forces the lender to act in a way that is not advantageous to either party. When you call your lender, try to speak to a manager right away and explain your situation.

The most important thing to do at this step is to only promise what you can deliver. If you have lost your job, don’t just ask for a one month extension. This will only delay a major financial problem. Explain that you lost your job and need at least three months to get back on your feet. Whatever you say at this point should be considered a binding agreement because this is a one chance situation. If the lender feels like you are not being honest with them, they will not hesitate to foreclose on your home, even in this default friendly environment.

Listen to all the alternative the lender offers. Remember, it might be in your best interest to sell your home with a real estate agent at this point and move to an apartment until you get back on your feet. Getting an additional three month window can facilitate this process and help you save a tremendous amount of home equity. The lender may offer you an additional line of credit or allow you to not pay your mortgage for a few months. Whatever choice you take, do everything in your power to meet the new agreement. If you can meet these obligations, you may even be able to get out of a tight situation without a blemish on your credit.

In this climate of Mortgage assistance, don’t let a mortgage vulture rob you of your hard earned home equity. Proactively working with banks can save your home and your credit score.