MISSION VIEJO, CA, June 17, 2009
/24-7PressRelease/ -- Feldman Law Center - Press Release by Feldman Law Center - Recent statistics showed that foreclosure filings reached one million in May with indications that the number could swell to 2.4 million by the end of 2009. Unfortunately, much like filing bankruptcy, the ramifications of a foreclosure filing will follow these families around for a long time. The first issue following a foreclosure, however, is an immediate one; finding a new place to live. Many families, in the battle to remain in their home, will use up most or all of their funds prior to foreclosure. That leaves them empty handed once the foreclosure is done. Combined with a credit score that reflects the foreclosure, the lack of funds can make a prospective landlord queasy about approving an applicant in this situation. Solutions include:
* Writing a letter of explanation to accompany the lease application. Putting a story behind the current situation, along with a detailed solution can go a long way.
* Offering a larger deposit than required. It may have to be borrowed or saved during the last stages of the foreclosure but the offer of a larger deposit will serve to lessen the risk perceived by the landlord.
* If there is a solid income history, leasing a property at a small fraction of the total income will ease the concerns of a landlord.
The second issue is the inevitable hit on the homeowner's credit score. Credit scoring is now integrated so that a foreclosure will not be an isolated event. Once a foreclosure hits a report, credit card interest rates will skyrocket and credit limits will be slashed. Carrying a high balance on credit cards can be prohibitively expensive at interest rates above 27%. It will also be difficult and expensive to get approved for any other type of loans. Solutions include:
* Debt settlement - Defaulting on consumer debt and then doing nothing doesn't make it go away. Additionally, staying current on your cards with rates at 30% is going to take precious money away from lease deposits, etc. If your credit score is going to take a pounding anyway, entering a debt settlement will cut your payments in half and pay the debt off within 48 months.
* Be proactive regarding your credit score. Be sure to note your scores when balances are paid off. Your credit score can be re-built over time as you get out of debt.
Like bankruptcies, prospective employers are now focusing more attention on foreclosure filings in terms of judging the character and financial responsibility of the applicant. Credit checks are now a regular part of the screening process, especially when there are a number of applicants. A foreclosure can tip the scales if everything else is equal between two applicants. A possible solution is to have a letter of explanation detailing the events that led to the foreclosure. Total honesty is going to be the best approach here and, who knows, if the person hiring you is going through his own set of financial challenges you may just find some common ground which to you getting a break.
The IRS considers the amount of money owed on the mortgage that is not recovered from the sale of the property as income for the homeowner. In any case where debt is forgiven, the amount not paid back will be taxed as income. Solutions here include a congressional pass that exempts the owners of foreclosed property from a tax hit if it was their primary residence and the property wasn't refinanced with a cash out loan. The tax bill can also be avoided by proving insolvency. If your debts are greater than your assets you'll be allowed a pass on money owed for forgiven debt.
In the end, the mental toll of being forced from your home and community could be the greatest cost. The best solution is to focus on learning from mistakes, putting the past in the past, and moving forward. Lastly, like filing bankruptcy, the stigma of filing foreclosure doesn't carry the baggage that it once did. As widespread as foreclosures are and with delinquencies occurring in 12% of homes across the country, they are quickly becoming seen as another part of life, not some sort of massive failure.
About Feldman Law Center
The Feldman Law Center is one of California's top loan modification companies, providing excellent service to our clients and is completely focused on keeping everyone one of our clients in their homes. Our loan modification experts work tirelessly to provide every homeowner we work with the information, guidance and support they need to modify their mortgages and keep the homes they've worked to buy. Visit Feldman Law Center at http://www.feldmanlawcenter.com
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