Bank foreclosing? Don’t abandon your home; it’s not that simple – from the Chattanooga Times Free Press

Reported by: Jason Reynolds


Saturday, May 3, 2008


It may be tempting for someone facing foreclosure to turn the house over to the bank, experts say, but doing so is hard to accomplish and could leave a homeowner with huge liabilities.


“You can’t always just walk away,” said Cindy Walker, managing broker of Crye-Leike Realtors’ REO (real estate owned) Division, which sells bank-repossessed homes. “The lender has to accept the deed.”


Companies such as Crye-Leike that deal with foreclosures are seeing an increase in people who mail their keys in to the lender thinking that handing the house over will relieve them of their debt, Ms. Walker said. Such a practice, called “jingle mail,” has to be approved by the lender before the homeowner does it, she said. The lender typically requires proof of financial difficulty, she said, and will want to know why the homeowner is having trouble.


Jingle mail is another name for deed in lieu of foreclosure, said Keith Sanford, executive vice president of First Tennessee Bank. The homeowner could be held liable for the difference in what he owed and what the bank re-sells the house for, he said. If $100,000 was owed and the bank re-sells it for $75,000, the owner would owe the bank $25,000.


Banks don’t like to foreclose, Mr. Sanford said, because foreclosures hurt an area’s property values, which affects banks’ other mortgage holdings. And banks incur expenses from repairing, maintaining and marketing foreclosed homes for resale, he said.


Mr. Sanford said the homeowner should talk to the lender and ask for help. The lender may allow a delayed payment or refinance the loan at a lower rate.


“We work with them as long as they are willing to work with us,” he said. “Ignoring the lender is the worst thing you can do.”


Struggling homeowners also can try working with a real estate agent to do a short sale, Ms. Walker said. Short sales happen when an owner facing foreclosure sells the house in an accelerated timeframe for less money than is owed. A homeowner thinking of doing a short sale or deed in lieu of foreclosure should talk to an accountant to see if there could be a tax liability, she said.


To avoid a foreclosure, you may also consider talking to a counseling service, Ms. Walker said.


Homeowners contacting a counseling agency should make sure it’s certified by the U.S. Department of Housing and Urban Development, experts say. Such agencies don’t charge for their services, said Tracy Johnson, educational specialist at the Consumer Credit Counseling Service.


Ms. Johnson’s agency is part of the Partnership for Families, Children and Adults, and does various types of financial counseling in addition to foreclosure counseling, she said. The agency serves residents in Southeast Tennessee and North Georgia.


Consumer Credit Counseling Service can do the most good if a homeowner contacts the agency soon after he starts having problems paying the mortgage, Ms. Johnson said.


“We like talking to them before they get a mailed notice saying it’s going to be auctioned,” she said. “At that point there’s not much we can do. But if you come to us early, we have tools.”




U.S. Department of Housing and Urban Development:


Partnership for Families, Children and Adults:


Crye-Leike Realtors’ REO Division: