Resources for Avoiding Foreclosure Scams
Help from the FTC: Understanding Mortgage Assistance Relief Scams

Help from Freddie Mac: Avoiding Fraud

Help from the U.S. Treasury: Avoiding
Mortgage and Foreclosure Rescue Scams

Help from the the Federal Reserve Board: Five Tips for Avoiding Foreclosure Scams

 
Public Info Kit: Frequently Asked Questions
 
Q: How many foreclosures are occurring in Wisconsin?

A: In Wisconsin, the number of homes in foreclosure has been climbing since 2005. In 2008, the last year for which complete statistics are available, Wisconsin finished the year with residential foreclosure filings up more than 62 percent from 2007, also a difficult year.

RealtyTrac, which tracks and sells foreclosure data, reported that Wisconsin had 19,695 properties in some form of foreclosure last year. With one of every 128 homes in foreclosure during 2008, Wisconsin’s foreclosure rate ranked 28th highest in the nation.

On a national level this year, foreclosure filings were reported on 321,480 properties in May, down 6 percent from April’s levels, but up 8 percent from the same month a year earlier.

Experts predict foreclosure filings in Wisconsin will continue to rise until the economy stabilizes and the unemployment rate begins to improve.


Q: What is the leading cause of foreclosure in Wisconsin?

A: Experts say there is no single cause behind the troubling foreclosure trend. However, they have noted a change in several of the leading factors contributing to the financial challenges many families face today.

In past years, easy credit and irresponsible consumer behavior played a significant role in many foreclosures.

Today, job losses and extended unemployment of one or both spouses as well as unexpected medical expenses and divorce or the death of a spouse are increasingly common factors. In short, today’s foreclosures are affecting many families and individuals with established credit ratings and excellent savings habits.

Irresponsible, and at times predatory, lending practices also have contributed to the high number of foreclosures in recent years, experts say.

In some cases, well-intentioned programs have extended mortgage loans to consumers with little money for a down payment or unrealistic expectations about their future earnings. In other cases, lenders have created new loan products with confusing fees or rapidly escalating interest rates. The current economic downturn has accelerated the failure of these loans.


Q: Why did the Wisconsin REALTORS® Association develop this website as a resource?

A: For more than a century, the Wisconsin REALTORS® Association has been a trusted source of advice and counsel on real estate and property matters. Today, our member brokers and agents adhere to the highest standards in the industry and our commitment to public service strengthens the communities in which we live and work.

While the REALTORS® have long promoted the benefits of home ownership, current economic challenges are making it increasingly difficult for families to hold on to the financial dreams they’ve worked so hard to achieve. Mindful of the hardships many home owners are facing, the Wisconsin REALTORS Association developed the Wisconsin Foreclosure Assistance Resource Center to serve as a helpful and credible source of information.

Beyond the needs of homeowners, the site also is designed to serve as a resource for policymakers, opinion leaders and members of the news media.

The Wisconsin REALTORS® Association appreciates the public trust and confidence it has earned and welcomes comments and suggestions about this initiative.

Q: What happens in a foreclosure?
A: A foreclosure occurs when payments have not been made on a mortgaged property. The lender can legally redeem or take the property away from the owner. Lenders typically begin the foreclosure process after three months of defaulted payments. Homeowners receive a letter from their lender notifying them of the lender’s intentions.

Q: What is a deficiency payment?
A: A deficiency payment is required from the borrower when a home sold through the foreclosure process fails to recoup enough to cover the loan balance. A court will enter a deficiency judgment against the former homeowner at the conclusion of the foreclosure sale process.

Q: What is a forbearance?
A: Forbearance is an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies may consider forbearance when you can show that funds from a bonus, tax refund, or other source will let you bring the mortgage current at a specific time in the future.

Q: What is a loan modification?

A: A loan modification is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your mortgage to make the payments more affordable. Common loan modifications include:

  • Adding missed payments to the existing loan balance
  • Making an adjustable-rate mortgage into a fixed-rate mortgage
  • Extending the number of years you have to repay

Q: How does a short sale work?

A: In a short sale, the lender accepts a discounted payoff because proceeds from the sale of the home do not fully cover the value of an existing loan. Although the lender may be left with a loss, many are willing to work with borrowers and accept a discounted payoff on a mortgage.

From a lender’s perspective, short sales limit the time and costly paperwork associated with the foreclosure process.  From the borrower’s perspective, although you will lose any equity in the home, the lender covers virtually all sales costs including commissions, escrow and title fees, and repair costs.  Your loan is paid off, the damage to your credit rating may be less than that of a completed foreclosure and you are able to move on more quickly.


Q: What is a Foreclosure Consultant?

A: If a property owner’s home is in foreclosure, he or she may want help in understanding the foreclosure process and his or her options. Some may contact real estate agents or foreclosure attorneys for assistance, but some may be attracted to mortgage foreclosure consultants. Unfortunately there are many so-called foreclosure consultants who are nothing but scam artists looking for easy profits. These scam artists have made it difficult for homeowners to distinguish them from legitimate foreclosure consultants or loss mitigation specialists.

Basically, a mortgage foreclosure consultant is any person who offers to help homeowners resolve their foreclosure problems by stopping or postponing the foreclosure sale, obtaining a forbearance of mortgage obligations, helping the owner obtain a loan or an advance of funds, avoiding any impairment of the owner’s credit resulting from the foreclosure or saving the home from foreclosure.

Legitimate foreclosure consultants can be found by contacting government agencies and nonprofit organizations. For instance, see the resources listed in “Best of the Legal Hotline: Finding Help for Homeowners,” in the May 2009 edition of the Wisconsin Real Estate Magazine, online at http://news.wra.org/story.asp?a=1114. A wide range of services are available over the phone, in person and online, and the cost of services differs from one option to the next. There are many options at no cost.


Q: Are there any tax implications as a result of the debt that is forgiven?
A: The Mortgage Forgiveness Debt Relief Act of 2007 allows borrowers to exclude debt forgiven in the sale of a principal residence from taxable income.

Wisconsin foreclosures compared to other states.

With WHEDA Executive Director Antonio Riley


Causes of foreclosure and learning lessons

With WRA President & CEO Mike Theo


Foreclosure trends and remaining in the home during foreclosure.

With Manager of the Consumer Credit Counseling Service of Greater Milwaukee Kathryn Crumpton.


The HOPE Hotline.

With WHEDA Executive Director Antonio Riley


Proactive bank measures to help homeowners.

With Wisconsin Bankers Association President & CEO Rose Oswald Poels


Average foreclosure timeline in Wisconsin.

With Wisconsin attorney David Sayas.


 
The information contained herein is of a general nature and should not be considered as advice on a particular fact situation. Individuals should consult with their lender, legal counsel or financial counselor with specific questions or for current developments.