By Admin in Filing Bankruptcy, News and Economy on June 30 2008
The new bankruptcy laws were passed in 2005 when mortgage companies and financial investment firms were artificially pumping money into the housing market to create a huge bubble. Ostensibly, these new laws were meant to curb the large problem of homeowners or borrowers taking out loans, spending too much, defaulting, and declaring bankruptcy to get away from their obligations. With the collapse of the economy and rising prices all around, however, it is becoming clearer by the day how poor legislators’ and banks’ assumptions were about how the average debtor responds to financial crisis.
First off, there was little evidence of borrowers taking out too many loans voluntarily and then deciding to stop paying and abuse the bankruptcy code to discharge their wasteful spending. On the contrary, the vast majority of people who declare bankruptcy do so only after a severe financial hardship makes it impossible for them to continue paying their bills. They may take out more loans to pay back previous loans and try to get ahead by falling further behind, but few homeowners ever just decide to stop making payments.
But the banks thought that they could trap consumers into paying back as much of their debts as they had income to spend repaying, and legislators elected by the people to protect them from this kind of predation readily agreed with the banks who financed their political campaigns. Thus, the stage was set for lenders to hand out any type of garbage loan they could come up with to people who had little income or assets, as they assumed the draconian bankruptcy laws would allow them to put their borrowers into debt slavery for 3-5 years in bankruptcy.
Even this plan to make as much money as possible with one more reason to make subprime mortgages, however, has begun to unravel, and bankruptcy filings which had slightly dropped after the laws were passed have now come back to pre-reform levels. But now there is a lot more toxic debt floating around in the housing market, a result of homeowners being given loans that they would not qualify for in the presence of sane lending guidelines. When mortgage companies thought they had another government crutch to lean upon in the bankruptcy reforms, there was little reason not to make bad loans.
Another irony is that even bankruptcy courts are now realizing that the real abusers of the process are the lenders, not the borrowers. Mortgage lenders routinely add extra fees and charges in such large amounts that the conscience is shocked, and their communication skills with the trustee and the courts as just as poor as they are with homeowners themselves when trying to avoid foreclosure. So the new laws were designed to prevent lenders from being taken advantage of, but the result has been to make it more difficult for borrowers to file bankruptcy while creditors continue to engage in predatory practices against homeowners and courts.
Nearly every law that comes out of the federal government these days seems to have the effect of empowering sociopathic corporations to engage in acts that work against the interests of their clients and people in general. These laws, however, eventually manifest the unintended consequences government intervention engenders, but even this is usually used as another excuse to expand the powers of politicians and banks to prey on the productive sectors of society. This is why it will be up to communities, private organizations, and local governments to come up with solutions to the foreclosure crisis and economic depression; beware anymore help and reform from Washington.
By Admin in News and Economy on June 25 2008
It should be clear by now that if there is to be any real long-term solution to the foreclosure crisis, it must come from the local level and involve creative ideas. The federal government has proposed nothing but more centralized power and tax breaks for multinational corporations and have tried to label these schemes “foreclosure relief.” Instead of stealing money from renters to bail out foreclosure victims, Congress has taken the wealth distribution a step further and is stealing money from renters and homeowners in foreclosure to reward airlines and automakers.
Thankfully, some local governments and concerned citizens have begun to put into place methods to deal with high foreclosure rates in creative ways. From tearing down abandoned homes to turn into community parks, to refusing to conduct sheriff sales, to issuing fines to banks which allow houses to fall into disrepair, the fight against foreclosure is being conducted on the front lines of actual cities and neighborhoods. And, in this instance, the people are winning some significant victories against mortgage companies.
In Youngstown, Ohio, the city is reacting to an outflow of population by tearing down entire blocks of abandoned homes and turning the areas into public parks. Not only does this help alleviate the decline in property values caused by high foreclosure rates and abandoned homes, it also helps cut down on crime and vandalism in the community. Returning the land to its original condition is a great idea for this city, and the extra land may one day prove to be useful as a neighborhood garden, for instance. High food and transportation costs are here to stay, so the more food an area can generate on its own, the more sustainable it can be long term.
Philadelphia has also become a city known for its creative approach to the foreclosure crisis. The sheriff of the county first declined to perform any more foreclosure auctions of properties for at least one month. As cities become ghost towns and suburbs turn into crime-ridden slums and property tax revenue drops off a cliff, eventually local governments will have to stop the bleeding of people and wealth out of the area. Elected government officials such as county sheriffs have much to gain in popularity and public opinion by standing up for homeowners, even if the goals of homeowners are the same as the never-ending goal of government self-preservation. In this case, however, it may be that everyone in the community wins, and only the multinational, federally-subsidized banks lose out.
Another city in Ohio, this time Cleveland, has begun targeting the owners of foreclosed homes after the public auction to keep the properties in good condition or face steep fines and penalties. Lenders that thought they could simply trick homeowners into taking predatory loans and then steal the real estate from them and enjoy their new real assets and tax breaks may have to reevaluate their plans. Banks, more than anyone, are well aware that paper money and huge derivative account balances represent nothing but an illusion of wealth, and if the whole system comes crashing down one day, it is much safer to own vast portions of the country’s land, rather than worthless paper and digital points in an account. But if it will be prohibitively expensive even to own the land and let the buildings fall into disrepair, the local governments may decide to take over the properties and sell them back to local homeowners.
Due to the predatory nature of the entire real estate bubble and mortgage industry of the past decade and longer, there will be many victims of the scam. Towns are emptying out of homeowners to make room for criminals, while condo projects sit half-abandoned and half-built. As federal lawmakers debate how best to make sure their chosen corporations do not feel the brunt of the economic slowdown, it will be up to local governments to find solutions to the foreclosure crisis. Some towns are already implementing methods to preserve wealth in the community, and we can all learn quite a lot from their experiments with taking on the predatory banks.
By Admin in Credit on June 23 2008
One more thing for homeowners to worry about when facing foreclosure is keeping on time with all of their other debts, such as credit cards and car loans. But the credit cards are often the most dangerous to fall behind on, as lenders may drastically increase interest rates and add hundreds of dollars in extra fees in just a few months. Homeowners also need to worry about having access to their credit lines cut off in the near future. Thankfully, however, most credit card companies will do nothing negative to homeowners just because they are facing foreclosure on the mortgage.
During the foreclosure process, there will be not adverse effects to homeowners’ credit cards as long as they are keeping on time with the payments on these credit lines. If they fall behind, of course, they may face severely negative consequences from creditors and will have even more damage to their credit scores. But simply being in foreclosure itself will not cause homeowners to lose their credit cards or have interest rates increase or extra charges added.
Many credit card companies issue contracts that state that the company may be able to raise interest rates on the card even if the borrowers never miss a payment on that line of credit. As long as they miss a payment on any other credit card, every company can raise rates. But even if a credit card is with the same bank as the mortgage, there is little that a mortgage company can do if a borrower’s credit cards have not gone into default. Mortgage lending and credit card lines are often done by different subsidiaries of a large bank, so either branch may not be aware of a default in the other line of credit.
However, after a foreclosure has ended, homeowners should be careful not to close out any credit lines that they may plan on using in the future. Because of the damage to their credit reports that late mortgage payments and a foreclosure will cause, it will be difficult, if not impossible, to qualify for new loans or credit lines with competitive interest rates for years after facing foreclosure. Despite the fact that the owners may have been able to stop foreclosure, there will be severe damage to their credit reports from the late payments.
Unless the homeowners voluntarily close their accounts or fall behind on the payments, the credit card companies will not do very much at all before, during, or after the home foreclosure process. The companies have no reason to take any negative actions against the borrowers just because they are facing foreclosure on a property they own. In fact, as long as the homeowners can keep on top of their credit card payments, they may try and request a higher credit line during foreclosure to be able to use some of that money to get back on top of the mortgage, although this is not a very sustainable solution.
On a somewhat unrelated note, though, just as homeowners who have Home Equity Lines of Credit on their properties and have had access cut off, credit card customers may see credit cards start to decrease the total available to borrowers. Banks are beginning to realize that there may be a large risk of default in consumer lending and are taking actions now to cut off access to credit for debtors in the greatest danger of falling behind (which may be nearly half of them, depending on how deep the recession will be). So, before facing foreclosure, homeowners may want to consider cutting up their current credit cards and getting used to a life without borrowing money, since their lenders may cut off their access soon anyway.
So, unless homeowners fall behind on their credit card payments while also facing foreclosure, their lending companies may do little to cut off their access or raise rates. If credit card limit restrictions are imposed, it may be more a sign of the bank’s fear of large defaults economy-wide, but most creditors may not even be aware of homeowners falling behind on their mortgage payment. However, due to the negative consequences of credit cards in the first place, it may be better for homeowners to take care of the issue and get rid of unnecessary cards before they become a problem later on.
By Admin in Foreclosure Legal Process, General Foreclosure Help on June 18 2008
Many homeowners seem to consider “filing foreclosure” as a way to deal with a financial hardship and give up a mortgage payment they are no longer able to afford. They may want to know how they can file for foreclosure the best way, or how to do it at all. However, this misunderstands the foreclosure process and the fact that it is not the responsibility of property owners to file foreclosure paperwork to begin the process.
It is not the homeowners themselves who file foreclosure on a house, nor do they decide when to file the paperwork, nor do they decide how it will be pursued in the local court system. All of these aspects are determined by the lenders and creditors who have liens on the house that show their claim to the property in the event of a default. To begin foreclosure, all the homeowner has to do is stop paying the mortgage every month, whether this is the first mortgage, second mortgage, home equity line of credit, or other lien on the house.
So, if homeowners stop sending in the monthly payment to the first mortgage, after a period of time (typically 3-6 months in a row of missed payments), the lender will automatically begin the foreclosure process. It will hire local attorneys to initiate the lawsuit in the local court system and have the paperwork served on the homeowners. The actual owners themselves do not have to do anything besides miss their mortgage payments — the mortgage company will begin the foreclosure proceedings with or without any further input from the borrowers.
The same works if the homeowners stop paying their second mortgage or any other junior liens. Even if they keep up on the first mortgage payments, the second lien holder will eventually sue the owners for foreclosure and attempt to have the house auctioned off. There may be little chance that the second mortgage company will receive much from the sheriff sale of a house, since properties typically sell for not even enough to pay off the first lien, but the lender will not wait forever for the owners to get back on track. Eventually, it will be better to take the loss, write off the loan, and take any write-offs that are available.
In the case of homeowners who stop paying on both or all mortgages at once, it is usually the first mortgage that will file for foreclosure first, since they have more of a stake in any proceeds from the auction. If the homeowners do not find a solution to stop foreclosure, then it is likely that the junior lien holders will simply let the house go and write off their loans. In most instances, the sheriff sale will not generate enough proceeds to pay off the first mortgage in full, and other liens will not be paid off at all. There may be a small chance of being sued afterwards for a deficiency judgment, but this is a somewhat remote possibility.
Thus, homeowners do not have much input at all in how the foreclosure process will move ahead on their home; once they begin missing payments, the mortgage company will inch ever closer to filing a lawsuit for foreclosure. Instead of asking how they can file foreclosure, more homeowners should be asking how they can avoid foreclosure and what options they have other than just watching the house be sold out from under them.
By Admin in Filing Bankruptcy on June 18 2008
If your HOA is trying to force a foreclosure on your condo or townhouse due to unpaid association fees, then it may be likely that they have a lien on the property. This may have been the result of some type of confession of judgment if you ever fell behind or due to the association suing you in civil court. Otherwise there may be some clause somewhere in your HOA paperwork that lets them sue you for a foreclosure if you fall behind on the association dues.
Either way, the HOA is attempting to collect the amount of money they are owed by you for utilizing the services of the HOA (such as they may be). Because you have been unable to pay them for whatever reason, they are now trying to sue you and request that the courts auction off your property to satisfy the unpaid fees. Even if the arrears only amount to a few hundred or thousand dollars, it is quite easy for creditors to force a foreclosure on a large asset such as a property — do not stop worrying just because the HOA fees may be such a small dollar amount.
Bankruptcy, when you file it, stops the collection of any debts you include in the bankruptcy filing until the debts are either discharged or you begin a legal payment plan through the courts. So, the HOA will have to halt any collection efforts if you file Chapter 13 bankruptcy, as long as you include your HOA debt in the petition. You are seeking legal protection from your creditors, and all of them, including the Homeowners Association, must stop trying to collect as long as the issue is in the bankruptcy court.
Thus, the HOA is acting to collect a debt that they are owed by pursuing foreclosure against you. Filing bankruptcy will force them to put their foreclosure process on hold until you work out an arrangement with them. In most cases, you will have to enter a 3-5 year payment plan through the court system to pay back the unpaid fees. If you make it through the plan, then you will have no worries about them foreclosing on the house because you will have paid back any amounts that you were behind. Not being behind means that there is no reason for foreclosure.
But, if you fall behind on the bankruptcy payments, the HOA can have the debt taken out of the filing and have the automatic stay released and begin foreclosure again from the point at which they left off before the bankruptcy. As well, you will be responsible for your regular HOA dues, in addition to the portion you are paying through the court payment plan. Therefore, it is a waste of time, not to mention severely damaging to your credit, to file Chapter 13 if you are unable to afford the regular payment plus a portion what you are behind.
You should probably consult with an attorney or other financial adviser to make sure you are doing everything correctly and work out a budget so you do not fall behind on the payment plan. Although it is possible to file bankruptcy on your own, there are many reasons why it may be a better idea to rely on professional legal advice during such a potentially stressful time. Foreclosure situations, whether they are from the original lender or another party such as the HOA, almost require outside assistance, even if just to make sure you have been as careful as possible and will not have your solution thrown out on a technicality.
By Admin in Stop Foreclosure Help on June 11 2008
Lawmakers nationwide are debating on which new laws will most help foreclosure victims. Many different solutions have been presented, such as stopping foreclosures completely for one year, or placing more regulations on sub prime lending. Once a decision is made, there is no guarantee that it will even help existing foreclosure victim. Many laws being recommended are to prevent future foreclosures and will offer no relief to homeowners currently in foreclosure.
If you are facing foreclosure and need help to stop foreclosure, you can take things into your own hands, or find help outside of new laws or government programs. Since the new laws may not even take effect and government programs can take months or years to provide assistance, you should search for other options to stop foreclosure.
Besides the obvious options of a foreclosure refinance or a foreclosure loan to pay the arrears, there are many other options that can help save your home from foreclosure. One of the most utilized methods is a loan modification or loan workout plan. A loan workout plan is when the lender allows a fixed period of time for you to pay the arrears. In most cases, you will pay the normal payment amount, plus an extra amount that is applied to your arrears. A loan modification is when the term of the loan and/or the interest rate is adjusted to make the payment more affordable. A loan modification, in many cases, is very similar to a refinance, because you can get a new lower rate and a new term for your loan.
Another option, that is only available when predatory lending has taken place, is to eliminate the arrears and begin the loan again, as if it were a brand new loan. This can happen when the lender wrote a fraudulent loan in the first place. We are seeing many cases where the lender is forced to forgive 100% of the arrears and begin a new loan with an affordable payment. This is a very new process and I don’t know of any other companies offering this process (outside of our company) but it has been very successful and has saved many homes from foreclosure.
If you are facing foreclosure or you are in fear of missing future payments, it’s important to stay in communications with your lender and seek help from a trained and qualified professional immediately. Many local governments provide free help and mortgage and real estate professionals can provide help at a very reasonable cost, so don’t waste time and get the help you need today!
By Admin in Deed in Lieu, Property Taxes on June 11 2008
Giving the bank a deed in lieu of foreclosure can be an effective way to get out from under a property and avoid some of the worst consequences of having a house fall into foreclosure. Homeowners are often concerned what they will have to pay even in this situation, though, and they do not want unresolved issues like property taxes to come back to haunt them in the future. In fact, the issue of who pays the property taxes and how much deserves attention by homeowners to make sure that their deed in lieu is done more efficiently.
Foreclosure victims will still owe any back property taxes on a house that they give the bank a deed in lieu of foreclosure on. Now how much they actually owe and who will come and collect it from them if it remains unpaid will depend largely on the circumstances of the foreclosure situation. How this issue is handled may be quite different in certain counties and states, and will also depend on if the owners are paying taxes through their monthly mortgage payment or on their own.
Actual property tax calculations will be a little bit different from state to state (and even in different counties within a state, not to mention city property taxes, if applicable), but in general homeowners will owe the taxes due this year for every day that they own the property. Once the deed in lieu is given to the bank, the lender will then owe the county taxes for every day of the year from that point onwards. This is a bit of a simplification, but individual county procedures make any specific illustrations difficult.
For example, if the ad valorum taxes are $365 per year, that comes out to $1.00 per day. So if the foreclosure victims own the house for 145 days out of the year, and then transfer the property back to the bank, they will owe $145.00 in property taxes. The bank will own the balance of that year’s taxes to the county.
But if homeowners are escrowing the taxes through their monthly mortgage payment, then even if they are behind on the loan, the bank will most likely make sure the property taxes are kept current. The amount that the lender pays to the county is added to the total mortgage balance and the amount the owners would need to reinstate the mortgage any time before the foreclosure auction. So if they are escrowing, the taxes have probably been paid to the county, and any collection attempts by the county is not a concern.
However, in cases where the homeowners escrow taxes on their own, they may have to pay any back taxes before the bank will accept a deed in lieu of foreclosure from them. Mortgage companies do not want to take the property back and let homeowners off the hook for the foreclosure if there is a danger that the county is going to auction the property for unpaid taxes. Again, the foreclosure victims would be responsible for the taxes up until the day you are no longer the owner of the house.
The actual date of transfer on the deed is handled a little bit differently in counties, so this may be an issue to watch out for and check on before transferring the deed in lieu of foreclosure. Some counties may require homeowners to pay that day’s share of the taxes, while others will determine the bank to be responsible for that one day portion of the property taxes. It would be necessary for homeowners to check how their county calculates this charge on property transfers to make sure it is all paid correctly. But this is usually only an issue if the owners are not escrowing payments.
So, if the yearly property taxes are escrowed through the mortgage, then they have probably been paid by the bank even if the owners have not made a mortgage payment in months. In this case, when the bank accepts the deed in lieu, there is nothing to worry about from the county. The lender accepts the deed to the house knowing that the owners did not pay the taxes, since the bank paid them and was never reimbursed. But if homeowners are paying taxes on their own, they may have to make sure the payments are current for up to the day they are the legal owner of the house. It might be a small price to pay to avoid a full foreclosure, though, and be worth it in the end.
By Admin in Stop Foreclosure Help on June 11 2008
Tomorrow, (June 12, 2008) Kansas City homeowners can attend a free workshop to learn how to save their home from foreclosure. This free workshop is located at the Education Center at Metropolitan Community College-Penn Valley from 2 to 8 PM. This workshop will teach homeowners how to structure a repayment plan with their lenders that will allow them to keep their home and avoid foreclosure.
Workshops like this are beginning to appear all over the country and are being sponsored by banks, non-profits, and federal agencies. If you need help finding a local workshop to attend, please use our foreclosure help request form to speak with a counselor about a workshop in your area.
By Admin in Stop Foreclosure Help on June 10 2008
Last month, Brad Geison, President and CEO of Foreclosure.com announced that he believes the worst of the housing downturn is history. If he’s right, we may see the industry start to turn around and get a nice boost in new home sales before the year ends. He’s not the only one predicting a drastic change in the market; many experts are expecting a turn around in the next 12 months, Including Mike Walsh at ForeclosureFish.com, who claims to see a steady increase of mortgage inquires. Although Mike expects the number of foreclosures to continue to increase, he says that most homeowners can stop foreclosure if they seek help fast. More options to stop foreclosure are available, as services like ForeclosureFish fight predatory lending and work to fix all the bad mortgages from the past.
Traditionally, the week after the Super Bowl is when home buyers start to look at properties. If Brad and Mike are correct, Realtors could expect one of the biggest post Super Bowl buying sprees they’ve seen in several years. With property values as low as they’ve ever been and interest rates even lower, it may be the best time ever to buy a new home. Not to mention all the low priced foreclosure properties flooding the market.
Finding a property in foreclosure may be a good option, but there are many dangers to avoid when looking at foreclosure properties.
Make sure the title is transferring free and clear. In some cases, the title will no longer belong to the seller. This is an easy problem to avoid, just do a lien and title search. Land and Title, LLC will do a simple lien and title search and a property valuation for about $250, which can save a lot of time and money in the future.
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Always do a home inspection and a full appraisal. It’s important to know the homes actual condition before buying. There are so many people who skip these steps because of the cost, but it is worth every penny to find out what a home is worth before you sign on the bottom line.
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Check the comparable properties in the area. If you can’t find any, just look at your property valuation or appraisal. These documents will list several similar homes in the immediate neighborhood. You should go check out these homes and compare them to the one you are considering buying. You may find that your home is a great deal, or you might find something even better.
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Find out exactly how long the property has been on the market. In most cases, there’s a good reason why a home doesn’t sell. If the home has been on the market for a long time, find out why.
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Don’t get in over your head. Just because a home that was once worth $500K is now selling for $300K doesn’t mean its a good investment. Many people look at this situation and think they will automatically make $200 when they sell the property, but this is rarely the case. Foreclosure properties are generally in very poor condition and will take quite a bit of work to get them back to their original value. Make sure you know your local market and know the repairs and improvements that are needed to sell your home at a profit. Today, many foreclosure investors are facing foreclosure themselves because they failed to calculate the actual expenses of their investment.
Working with a local Realtor will probably be the quickest and easiest way to find a foreclosure property, but if you are adventurous and want to try it on your own, there are many companies who can help you search foreclosure and pre-foreclosure listings nationwide. Pre-foreclosure listings are homes that are in the beginning stages of foreclosure or the notice of default stage. A foreclosure property is a property that has already been through the foreclosure process. Pre-foreclosure properties are generally sold by the owner and foreclosure properties are sold be real estate agents on behalf of the lender who foreclosed on the home.
Only time will tell if the real estate market is improving, but no matter when you buy a home, you’re sure to get many years of enjoyment, and if done correctly, it can be the best investment of your life!
By Admin in News and Economy on June 10 2008
If the previous year of record foreclosure rates, falling home values, a declining stock market, and continuing inflation have seemed like too much catastrophe for the US economy to bear, just wait. There will be no short term recovery in the housing market; in fact, foreclosures will continue to increase and property values will keep falling for at least the next year, with a second wave of foreclosures set to begin in the spring of 2009.
Now that the subprime mortgage market has collapsed, the next shoe to drop will be the Option Adjustable Rate Mortgages, a wave of which is set to adjust beginning in April 2009. These loans were originally sold to homeowners eager to cash in on rising property values and who wanted to keep their payments as low as possible. But the steep declines in real estate markets over the past year due to the foreclosure crisis is helping to fuel a self-sustaining cycle of foreclosures, followed by property value decrease, followed by more foreclosures.
What makes the coming option ARM resets most worrying is who they were marketed to and what the “option” part of the mortgage really means. Borrowers with credit slightly better than subprime were able to qualify for these loans, but lending guidelines were almost nonexistent during the boom. What was considered “slightly better than subprime” then may be considered completely unqualified for a mortgage loan now. So the banks may find that they have a second wave of subprime borrowers struggling at the present time who will have no other option than to default when their payments adjust.
And when the payments reset based on the interest rates at the time of adjustment, and monthly mortgage payments on such loans may become instantly unmanageable for many homeowners. Option ARMs allowed homeowners to pay only a small portion of the interest on their loan every month, which may result in negative amortization. In other words, borrowers keep making monthly payments only to find out that they are falling further behind on the loan every month.
At the same time, their properties are falling in value, so they are being attacked from both sides: equity is disappearing as their monthly payment is not enough to pay off the interest, and property values are falling closer to the amount of the loan or below. This helps to accelerate how quickly homeowners find themselves underwater in a house. And few homeowners feel good about sending in a higher mortgage payment every month when they realize their equity has been completely eliminated by the loan itself and the market.
As usual, many people obtained these loans not fully understanding how they worked, why their payment was so low, and how they were able to qualify for such a seemingly great interest rate with such seemingly poor credit. Many of them may be surprised to find out that, when their interest rate adjusts, they will need to begin making payments on both the principal and interest of the loan. But even for the ones who are aware of this danger of a skyrocketing payment, selling the home is no longer an option when the market has declined so far.
It is clear already that there is an economic crisis in the housing market, which was fostered and inflated by the Federal Reserve’s cheap monetary policy and the banks’ abandonment of reasonable lending standards. And although there have already been predictions of the end of the recession that was never really a recession, looking a bit into the future seems to suggest that the foreclosure crisis and declining real estate values are only just beginning. If homeowners are able to refinance to a fixed rate or sell at a profit or break-even point, now may be the time, before it is too late.
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