A dark “Jot Cloud” is silently hovering above many unsuspecting homeowners

A dark “Jot Cloud” is silently hovering above many unsuspecting homeowners who are defaulting on their mortgages today, which could come back to haunt them years from now to discover they still owe thousands of dollars on their short sale or foreclosed home, and a collection agency is coming after them to make it happen! What does this mean?


In the background, lenders have been quietly selling second mortgages and home equity lines left unpaid after foreclosures and short sales. According to Sylvia Alayon, a vice president with New York-based Consumer Mortgage Audit Center, “The only relief a consumer will have is entering into a debt negotiation plan or filing for bankruptcy.” The firm provides mortgage analysis to lenders, advocacy groups and attorneys.


If any of you have experienced being hounded by a credit collection agency, you know how they play the game. The buyers: collection agencies, which in many states have years to make a claim. If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even garnish their wages. This practice by the mortgage industry certainly suggests an ominous, looming echo of today’s real estate meltdown. This will renew financial stress on tens of thousands of local consumers and could dampen economic recovery as debt collectors seek at least partial repayment of millions of dollars in unpaid home loans.


There will be a lot of unhappy people when this situation hits. As is known, history always repeats itself and so this is nothing new as this happened in the 90s. Just when you think you have done everything you can to do the right thing and eventually get back on your feet, your making money, and the economy has rebounded and is good, they hit you with the ax.
Alayon said most people are so stressed out and exhausted by trying to save their homes today that they are unaware that they could face another hit later. And many who are losing their homes don’t get the advice necessary to prevent future fallout, say nonprofit loan counselors.


Tens of thousands of people in California have this hanging over their heads and don’t even know it according to Scot Thomson, principal at for-profit Mortgage Resolution Services in Carmichael, CA. He fears a new wave of bankruptcies might flatten people just starting to recover from losing their homes.


An entire industry is gearing up to buy their debt at deep discounts and collect what they can, Alayons aid. “It is a big business and investors are coming out of the woodwork. It’s a very lucrative business,” she said. Real estate insiders and financial players know it as “scratch and dent.”


Homeowners should seek advice and nonprofit counselors can help. Although real estate agents who are certified with the SFR endorsement for short sale and foreclosure resource, they are not equipped to handle the repercussions. Realtors are set up to make the sale and deal with all the contract legalities within the real estate sales industry. However, it is their duty to inform their clients of the possible repercussions that could have an impact on their clients, years down the road so they can take the necessary steps to contact the professionals in the field of consumer credit that can assist them.


Today the government is already moving to limit potential damage to millions of home owners who are now struggling with home loans. The new Obama short sale program aims to prevent banks that hold second-lien loans from pursuing collections from homeowners after the short sale. This program goes into effect April 5, 2010 and works as follows: Sellers will receive notice that their servicer has steered part of the sales proceeds to secondary lien holders “in exchange for release and full satisfaction of their liens.” This release applies only to short sales done through the administration’s Home Affordable Foreclosure Alternatives program.


As a Realtor, and a short sale and Foreclosure resource (SFR), I know that nothing in life is free. If you make a contractual agreement, somewhere, sometime down the line, there will be a settlement agreement and meeting of the minds. So I suggest that you explore all your options and protect yourself early on and be prepared for the consequences that will follow from the decision you make today. Get legal counsel at the beginning signs of financial troubles that will affect you for years to come. Contact a non-profit debt counseling service and an attorney for free advice at the onset.

Excerpts based on article distributed by McClatchy-Tribune Information Services. The Sacramento Bee (CA)