Watch Out for the New Players in the Mortgage Field: Hedge Funds

Homeowners who end up unable to pay their mortgage may soon see their homes taken over by a surprising new player in the field: hedge fund firms. According to The New York Times, banks have sold over 100,000 delinquent mortgages to private equity and hedge fund companies, who restructure these loans—through modifications or foreclosures—in an effort to resell them and turn a profit.

Yet while some hedge funds are being praised for their creative solutions for struggling homeowners, others have been branded bullies—quickly pushing homes into foreclosure and showing less flexibility than banks when negotiating modifications so homeowners can hang onto their property. 

One particular company, Lone Star Funds—a $60 billion private equity firm served by Caliber Home Loans—has attracted criticism from numerous homeowners who’ve complained that the company has tried to kick them out of their home even though they’ve filed the necessary paperwork to stay. In many states, filing for a loan modification legally keeps foreclosure at bay. Yet by arguing that such applications can take up to a week to get “uploaded” into their system, Caliber has attempted to proceed with the foreclosures anyway. 

Overall the picture looks grim: A February report by the Department of Housing and Urban Development analyzing the outcome of 79,000 delinquent mortgages it’d sold over the past five years (to Lone Star and other firms) found that only 9% have been restructured. Instead, 20% have been foreclosed and 6.4% resold to other companies. 

Yet homeowners who find themselves fighting hedge fund firms do have recourse—and the courts are listening, rescinding foreclosures that have been forced through, and filing restraining orders on firms attempting to evict residents who have the right to stay. 

HUD has also stepped in to help homeowners, too. Not only has it recently increased the period during which private buyers can’t foreclose from six to 12 months, it’s also making efforts to sell delinquent loans to nonprofits that may be more compassionate to struggling residents than some equity firm just hoping to make a quick buck. 

Nonetheless, this trend underscores the fact that you should try your best to get a mortgage that’s within your ability to pay, even in the case of major life changes like job loss or a growing family. And if you do find yourself in a situation where you can’t pay your mortgage, this is not something you want to let slide. Give yourself plenty of time to alert your lender and explore your options; HUD can also put you in touch with a housing counselor to help.

Because the last thing you need when you’re scrambling to make ends meet is a foreclosure notice on your front door.

Article By Judy Dutton on Realtor.com

Courtesy of First Choice Title Services & Escrow, Inc.

 First Choice Title Services & Escrow, Inc

3 SW 129th Avenue, Suite 202

Pembroke Pines, FL 33027

http://www.firstchoicetitleservices.com/

Phone (954) 433-7680

Fax (954) 433-7355

maria@firstchoicetitleservices.com