Some homeowners are confronting a difficult choice: sell or face foreclosure. Even those with a considerable equity stake may find themselves in this dilemma. What can lenders do to help borrowers facilitate a sale, protect the equity in their home, and potentially remain in their home following the sale by negotiating a leaseback option? HousingWire recently spoke with Phil Johnsen, SVP/GM Servicing & Real Estate Solutions at Altisource, about how Altisource’s Equity Shield can help.
HousingWire: As mortgage forbearance programs come to an end, how should at-risk homeowners deal with potential foreclosure?
Phil Johnsen: The COVID-19 pandemic has pushed many borrowers to the brink of foreclosure due to job loss and other forms of economic disruption. Current inflation worries and the rising costs of goods have further exacerbated this problem.
However, many at-risk borrowers find themselves in a unique situation where they have a good amount of equity in their homes following the significant rise in property values over the past few years. This gives borrowers options that they may not have had in the past.
The best approach for at-risk borrowers to take is to become better informed and identify the options that help preserve their equity and then take action.
HW: What can homeowners do to combat the hit to their credit score and pocketbook (equity in their home) caused by a foreclosure?
PJ: A foreclosure can impose a long-lasting, negative impact on a borrower’s credit score, limiting their borrowing capacity for years to come. The borrower’s equity can be further eroded by legal and other fees. The best strategy is to avoid that scenario altogether by taking action before the foreclosure becomes final.
At-risk borrowers can start by 1) understanding how much equity is in their home, and 2) educating themselves on the available options to sell their property. Their bank or mortgage servicing company will be a great source of information, presenting options to assist the borrower.
One of those options should include Equity Shield from Altisource – a new program for distressed borrowers to consider as they seek to retain as much equity as possible while eliminating the burden of a mortgage they can no longer afford.
HW: What are the main benefits of Equity Shield?
The Equity Shield program is a new borrower-friendly option provided to those who find themselves in financial difficulty and want to retain the equity from their homes as they act to eliminate their mortgage burden.
The Equity Shield website, EquityShield.org, provides valuable information and insights into navigating the foreclosure process. Helpful content, including answers to frequently asked questions, makes it easy for borrowers to understand the foreclosure process and the many options available to them.
A contact center and live chat support are available to assist borrowers as they familiarize themselves with the process.
The Equity Shield program offers the following benefits that are provided free of charge to the borrower:
- Halts the Foreclosure Process: Suspends the foreclosure process for 120 days, including halting any additional late fees being applied to the borrower’s account over that same period of time.
- Quantifies the Home’s Value: Schedules a discreet evaluation of the home’s value to be conducted by an experienced real estate professional at a time that is convenient to the borrower.
- Identifies Any Title Problems: Searches the property’s chain of title to identify any potential problems that may slow down the sale of the property.
- Provides Expert Assistance: Connects the borrower to an experienced Equity Shield specialist who will assist the borrower with navigating the program, understand the potential value and equity in the home, review the title report to identify any discrepancies that may need to be addressed, and help the borrower decide on a sales strategy that makes sense for them.
- Maintains Confidentiality: Allows the borrower to discreetly explore their options without announcing to neighbors they are in default.
- Provides Peace of Mind: Helps borrowers eliminate their mortgage burden by selling the property, potentially with a leaseback option, while striving to maximize their equity and minimize the damage to their credit report that a foreclosure can cause.
Working closely with the borrower’s bank or mortgage servicing company, an assigned Equity Shield specialist will present a variety of sales strategies for the borrower to consider, including:
- Traditional real estate sale using a broker of the borrower’s own choosing.
- The Hubzu Signature Seller program, which combines the use of a professional listing agent with the expanded scale of a nationwide auction marketing company to engage buyers and create competition for the property.
- Rental conversion, where the seller may stay in the home as a renter – no moving or life disruption.
Equity Shield gives at-risk borrowers the education, options, and control they need to make the best decision for their unique situation. The program’s goal is to maximize the equity they retain from the sale of their home while potentially giving them the option to stay in their home and rent from the purchaser.
Mortgage servicers also benefit from the Equity Shield program by providing another viable option to their customers, while demonstrating to the CFPB and other regulators their commitment to assisting distressed borrowers. This enhances the public’s impression of the servicer and strengthens its position as an advocate for at-risk borrowers.
HW: How does Equity Shield stop the foreclosure process?
Equity Shield helps borrowers pause the foreclosure process, if approved by their bank or mortgage servicing company, and provides options to relieve the financial pressures of a mortgage they can no longer afford.
As part of this voluntary program, banks and mortgage servicing companies agree to suspend the foreclosure process for 120 days and cover the cost of the home valuation and title search.
Borrowers have complete discretion in deciding whether to join the program and can opt-out at any point. Banks and mortgage servicing companies win because they can provide another effective option for distressed borrowers to consider.