Posted By Victoria Boss Vero Beach Realtor || 29-May-2014
According to Zillow, an online real estate database, the rate of underwater mortgages in Broward, Miami-Dade, and Palm Beach Counties, was found to be 39.6 percent. Underwater mortgages signify a home purchase loan with a higher balance than the market value of the home.
Many people in Florida suffer from low-equity or no-equity in their homes purchased before the economic downturn, when prices declined, six years ago. The prices have since increased to just below pre-recession levels. From 2012 to the present, the number of borrowers with negative equity reduced to a rate of 41 percent. In spite of such reductions, the state is still facing the consequences of underwater mortgages. Moreover, the increase in unemployment, illness, and divorce just adds fuel to the fire.
RealtyTrac, a real estate information company and online marketplace for foreclosed and defaulted properties, reported that in 2013, the rate of foreclosure cases increased by 7 percent with a total of 85,671 foreclosure cases. This indicates a 17 percent increase per year in the rates of foreclosure cases. A loan modification is suggested to be the best option available for homes under foreclosure and for debtors who face hardships in making monthly payments. The debtors must submit a hardship letter eliciting the financial status of the debtor and the reason for the loan modification. Tax returns, bank statements, and utility bills are submitted along with the letter. The lender considers the letter and provides the modification depending on the case. The modification is then followed for a short term trial period. If the modification works out properly in the trial period, the modified agreement is finalized.
The lenders may agree to dispense some terms of the loan agreement to make it possible for the debtors to actually make payments on the loan. The agreement is modified in terms of mortgage interest rate, monthly mortgage payment, reduction in principal amount, and amortization. The modifications in the loan facilitate the debtor to relieve the loan by paying 31 percent of their gross monthly income.
A loan modification is the most favorable option for debtors to relieve the foreclosure action. The Florida State Senate, in its attempt to expedite the foreclosure process, passed a bill on May 3, 2013. The bill is still pending Governor Rick Scott’s signature. The legislation provides speedy disposal of the case by reviewing the cases in chambers. The conduct of the hearing is dispensed with. The lender can request the court to enter a final judgment in case the borrower fails to prove a valid case against the lender. The borrower is also given an opportunity to present his defenses. This legislation would prove useful for increasing the pace of the foreclosure process.