This presentation discusses aspects of foreclosures, including what to do if your home is currently in foreclosure. It also discusses how to find and purchase foreclosures.

1. The Foreclosure Crisis:
Saving your American Dream

2. What is foreclosure?
If you have a mortgage on your home and fall
behind in payment (usually after 3 months), the
bank or lender has a legal right to take over your
home.
This means you will need to move, and it may
also affect your credit score.

3. What if I can’t make my mortgage
payment?
• Talk to your lender, explain the circumstances. Ask for
the “Loss Mitigation Specialist”.
• Know your options:
Contact
Muncie Homeowner and Development Center
111 E. Adams St. 282-6656
Other HUD-approved counseling centers can be found at
http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?&webL
istAction=search&searchstate=IN or by call 1-800-877-
8339

4. Other tips:
• Keep the letters from your lender—ignoring
them won’t make the problem go away!
• Don’t fall for scams—avoid counseling
companies that charge or others that offer to
help you sell your home.
• Stay in your home until after the foreclosure.
Find more info at
http://portal.hud.gov/hudportal/documents/hu
ddoc?id=fha_saveyourhome.pdf

5. I’ve received a notice of foreclosure—
what happens next?
In Indiana, you have to right to request a
mortgage settlement with your lender. At the
settlement conference you will meet with a
representative from the lender to discuss
alternatives to foreclosure.
For detailed information about the process go to
www.877gethope.org or call 1-877-GET-HOPE

6. If you want to stay in your home, some
options may include:
• Forbearance—the lender agrees to suspend or
lower payments for a set amount of time.
• Loan Modification—payments are lowered
due to less interest or a longer loan period.
• Repayment

7. If you decide not to keep your home,
these options may exist:
• Short sale—you sell your house for less than
what is owed to the lender
• Deed in lieu of Foreclosure—the house is
given back to the lender.
More information about options can be found at
www.in.gov/judiciary/selfservice/2359.htm

8. If no settlement is reached, what is the
legal process involved in foreclosure?
• The lender will file for foreclosure with the court.
• The court will hold a trial—you will have an
opportunity of file an “answer” in the case,
otherwise you will lose by default without a
hearing.
• If the court rules for foreclosure, you will be
evicted from the house.
• For more information or to find legal help, go to
Indiana Legal Services www.indianajustice.org,

9. The Foreclosure Crisis:
Saving your American Dream

10. How do I find
foreclosed properties?
There are several ways to locate listings of foreclosures,
also know as “distressed properties.” Private companies
collect foreclosure listings from lenders such as banks,
mortgage brokers, corporate sellers, and government
agencies, then list them on the Internet.

11. Where Do I Look?
Most foreclosures databases are searchable by state, city,
zip code, and price. Some are searchable by a property’s
status, eg. pre-foreclosure, foreclosure, auction, bankruptcy,
short sale, or sheriff’s sale. They also are a source of
foreclosure statistics.
Private foreclosure listing sites:
www.foreclosure.com/
www.realtytrac.com/home/
www.bankforeclosuressale.com/list/indiana.html
www.foreclosurefreesearch.com/

12. Where Do I Look?
Government-owned properties also can be searched on
many of these databases. Agencies such as HUD (Housing
and Urban Development), VA (Veterans’ Administration), IRS
(Internal Revenue Service), Fannie Mae, and Freddie Mac
typically have repossessed properties available.
Search government-owned properties at
homesales.gov/homesales/mainAction.do.
Search Fannie Mae at www.homepath.com/.
Search Freddie Mac at homesteps.com/featuresearch.html.
Search the IRS at
www.treasury.gov/auctions/irs/cat_Real7.htm.

13. What are different types of
“distressed properties”?
• Pre-foreclosures: Properties still owned by borrowers who are
in default.
• Auction properties: Properties offered in a public auction
sale, where the new owner pays in full and takes immediate
possession.
• Real Estate-Owned (REO): Properties still owned by a bank or
other lender after an unsuccessful auction sale.
• Federally-insured properties: Some loans are backed by the
government (eg. VA, HUD, Fannie Mae). These agencies
reimburse the lender, then market the property through
public sales or contractors.

14. What’s a “short sale”?
In a short sale, the owner of a distressed property can avoid
going through foreclosure when a third party buyer negotiates
directly with the lender for a sale at a price below the amount
actually owed on the property. In other words, the lender
agrees to take a loss in order to get rid of the property. The
new buyer will likely bargain with the lender in a series of
offers/counteroffers until a price is determined.

15. What’s the buying process?
Click through this handy tutorial to get an overview
of the buying process for pre-foreclosures, auction
sales, and REO’s.
http://www.realtytrac.com/foreclosure/how-to-buy-
foreclosures.html

16. Pitfalls in buying
distressed properties
• Properties are sold “as is.” The buyer will be responsible for
updates or repairs and should review the property with an
inspector or contractor. Run the numbers with a Renovation
Calculator:
cgi.money.cnn.com/tools/renovation/renovation.html
• The buyer must secure their own financing prior to purchase
and must know how the funds will change hands (eg. cash,
cashier’s check, etc.).
• A pre-foreclosure property retains all debts (eg. loans,
mortgages, liens, judgments, etc.), which must be paid off.
The buyer must investigate the property’s history to
understand its financial obligations.

17. More pitfalls
• A buyer for a pre-foreclosure property must negotiate
with all the people named on the title. All must be in
agreement for a final contract to be signed.
• The buyer must check recent sales prices for comparable
properties before entering into a sales contract to avoid
paying a price above the property’s market value.
• Buy title insurance to protect against title defects that
"cloud title“, or cast uncertainty on the buyer's
ownership rights, such as undiscovered liens, forged
signatures or defects in documentation.

18. Find a broker or realtor
A real estate professional may be helpful in successfully
purchase a distressed property. Real estate agents with
additional training and certifications can become a
Realtor©, broker, or other designations. Use the Find a
REALTOR function at www.realtor.com/realestateagents/
to locate a local professional or real estate company.

19. Find a real estate attorney
A real estate attorney can help negotiate with owners or lenders
and clarify procedural or title concerns associated with distressed
properties.
Contact the Muncie Bar Association at
www.inbar.org/LocalBars/DelawareMuncie/tabid/172/Default.as
px. The I Want To Find a Lawyer tool at www.martindale.com/
also can locate a local attorney. In the Practice Area box, choose
“Real Estate”.

20. Find a house inspector
A professional inspection of a distressed property before
purchase may reveal unexpected defects that affect the
marketability of the property and the price you should
offer.
Ask friends, business associates, or your real estate
professional to recommend a reputable inspector in your
area, or consult the American Society of House
Inspectors website at www.ashi.org/find/default.aspx.

21. Federal Mortgage Settlement
In response to widespread industry misconduct and
its role in the foreclosure crisis, this settlement
mandates five major mortgage servicers to reform
mortgage loan practices and provide relief for
struggling homeowners. Ally/GMAC, Bank of
America, Citi, JPMorgan Chase, and Wells Fargo are
affected. All state except Oklahoma are parties in
the settlement.

22. Key Terms of the Mortgage Settlement
• Relief for Struggling Homeowners. Assist borrowers in default or at risk
of default through principal reduction, assistance in short sales, or
unemployed payment forebearance.
• Refinancing of Underwater Homes. Banks must notify borrowers of
refinancing programs. Eligibility restrictions apply.
• Mortgage Servicing Reforms. New guidelines prohibit robo-signing and
“dual tracking” (where banks pursue foreclosure while simultaneously
engaging the borrower in loss mitigation). They also mandate loss
mitigation discussion and fair response times to borrowers.
• Monitoring and Enforcement. An independent Monitor will oversee
banks’ compliance and report to the attorneys general. Violations will be
subject to civil penalties of up to $5 million.
• Payments to Foreclosure Victims. Borrowers who were improperly
foreclosed upon or not offered loss mitigation may claim a $2,000
payment and are free to pursue additional claims in court.
• Release of Claims. Named bank parties are released of claims brought by
attorneys general or federal banking regulators.