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Mortgage Default Results in Cash for Keys?

Mortgage Default Solutions

I recently met a local Southern California Realtor, Dustin Figueroa, and was instantly drawn to his passion for helping homeowners that find themselves in a difficult financial situation with difficult decisions to make.

Dustin and the EHS Realty team specialize helping homeowners navigate their options once the mortgage payment falls behind enough that a Notice of Default is recorded.

Once a Notice of Default (NOD) is recorded, the foreclosure process has officially started.

Buy Again After Financial Hardship

Bad things happen to good people all the time.  Since 2011, we have specialized in helping families recover after a financial hardship.

Specializing in qualifying for a mortgage after bankruptcy, foreclosure, short sale or deed in lieu of foreclosure, it’s amazing to me how many folks delay their recovery because of bad, or inaccurate advice at the time of the financial hardship.

That’s where Dustin and his team really stand out as Consumer Protection Super Heroes!

Having a professional in your corner to help guide you through your options can make the difference between having a foreclosure on your credit, or in this particular case, walking away with “cash for keys”.

Short Sale with Cash for Keys

In this interview, Dustin and I discuss a case where the homeowner avoided foreclosure and actually walked away with enough money to move their family into a new home.

Scott Schang:
Welcome, everybody. My name is Scott Schang and I am a partner over here at BuyWise Mortgage. We’re a California mortgage broker and I have a special guest with me today, Dustin Figeroa. He’s also a partner in EHS Realty, Ontario. Ontario areas. Ontario’s where your office is. Correct?

Dustin Figueroa:
Ontario. Ontario, California. Correct.

Scott Schang:
So I asked if you’ve been doing some research and if you find yourself in a situation where you’re in financial hardship and potentially losing your home, had a notice of default, potentially recorded and you’re starting to get phone calls and mail and things like that.

This is where Dustin can help and this is why I have asked him to share some stories with us today on different people that he’s helped in these different situations because very much like what we do over here at BuyWise and what I’ve been doing for 10 years at findmywayhome.com, is just consumer protection and consumer education.

Scott Schang:
And bad things happen to good people all of the time, and I don’t think it’s an accident that I was able to meet Dustin and we share a lot of our values and a lot of our business models on the types of situations that we try to help guide people through so that potentially the event is not as difficult. And in a perfect world, the recovery from the hardship is sooner and better and better for everyone.

Scott Schang:
So, Dustin, thanks again for being here and sharing these stories with us.

Dustin Figueroa:
Hey, my pleasure. Looking forward to it.

Scott Schang:
All right. So, this particular story was, you had a husband and wife in Long Beach, California and they had received a notice of default. I know you explained it in a previous video. Explain real quickly, how do you find out that people have a notice of default and how do you reach out and try to help them?

Dustin Figueroa:
So when someone is behind on their mortgage and it gets so bad as to the bank has to take the next step, which is initiating the pre-foreclosure process, they’re going to file with the county recorder’s office, what’s called a notice of default. We like to call it NOD for short.

Scott Schang:
We love our acronyms in real estate.

Dustin Figueroa:
Bingo, yup. Just to make communication faster. What we do when we pull that data, we send mailers to all over LA County, San Bernardino County, and Riverside County. Those records, they are public records. So chances are we’re not the only one sending out those mailers. I’m sure that there’s a lot more.

Dustin Figueroa:
Every time I go visit a client’s house, I just see a nice little stack of paperwork on their desk because that pretty much is like that drop of blood in the water and the sharks come out.

Dustin Figueroa:
So we have to do a good job ourselves of distinguishing ourselves, not as sharks, but someone that could actually come in and help you out, help you avoid foreclosure. Or even if there’s a shot of you being able to keep the property.

Yeah, we’re going to definitely look into that and see what we can do to help you either do a loan modification, get on a repayment plan with the bank or worst-case scenario, if those options are just simply not viable options, the worst thing that you can do is just simply let the home go into foreclosure.

There are always options and with enough time, if you make a phone call or if you take action relatively quickly, or even if you wait a little bit, we can still help.

Dustin Figueroa:
But the point is, is to not let your home go into foreclosure because you’re not going to get any benefits. It’s just a lot of heartache and that’s what we do is we want to make sure that we educate you and we tell you everything that there is to know about your particular situation.

Because I haven’t had a situation where I had two cases that are exactly alike, but similar, but not alike. So it’s something that we want to make sure that we do everything we can to help out.

Scott Schang:
Okay. So this particular family, and typically how you’ll reach out to them, so you get public records, you subscribe to a service that you get notified if there’s a notice, a default in an area. You’re typically what? Sending out a piece of mail. So you’re mailing them something.

Dustin Figueroa:
Yeah. It’s just a letter. It’s a letter. Yeah, it’s a very simple letter that they open up. It has my picture on there so they can actually see my face. Not to say that my face is anything wonderful to look at, but it is helpful to have my face on there because that way they know A, I am one person that can help you with a team and B, I am local.

I’m not in some other state or some other country. I’m a Southern California native with an office in Southern California that you can come to see me at my office or I can come to you if coming to my office is a little difficult at the moment.

Scott Schang:
It’s going to be the same face of the person that helps them through this.

Dustin Figueroa:
Bingo. Correct. Correct. I mean, I usually come with a team member so that way I don’t work alone, and someone who comes with me to help out the file. We got a lot of files on our desks. So we do our best to make sure that we are always catering and serving our client’s needs.

Scott Schang:
So this husband and wife, I mean we talk about this all the time. I mean, most of the time it’s not people being negligent that gets them into this situation. Sometimes there are life events that happen, and I would probably say the majority of the time there’s some sort of life event that occurred that finds these particular people in a certain situation.

Scott Schang:
Tell me a little bit about what happened to this husband and wife that they found themselves in a position where you could help.

Dustin Figueroa:
So I know when our office gets a phone call, there’s a sensitive story there. There’s definitely a lot to listen to and that’s something that we take the time to listen to our clients tell us about what got you into this situation. What brought you to this point?

And in this particular case with this Long Beach file is first, the wife, unfortunately, she was diagnosed with cancer, wasn’t able to go to work. As we all know, healthcare is not cheap, and then, unfortunately, they got hit with a double whammy and the husband too became ill and wasn’t able to work anymore.

Scott Schang:
Oh my God.

Dustin Figueroa:
Yeah. So it wasn’t the best scenario for them. It wasn’t the retirement that they were hoping for. These clients were supposed to be in their golden years, retiring, enjoying life and instead here they are fighting for their lives while trying to make ends meet with you bills that are piling up because of their health or whatever the case may be.

Dustin Figueroa:
So, in this situation, we had a client that … because if we kind of know and anticipate that if you’re behind on your mortgage, chances are you might be behind on other bills, other debt. So this one was a challenge because there were several judgments on the title. There was a couple of liens, title tax liens I should say. There was a second mortgage.

Dustin Figueroa:
So not only did we have to work with the first lender, we had to work with the second lender.

Scott Schang:
Two lenders to work with.

Dustin Figueroa:
Oh yeah. A couple of tax liens, a couple of judgments. To get everybody on the same page and to work together and to try to negotiate payoffs, it does take time. A lot of it.

Scott Schang:
So did this particular family have equity in their home?

Dustin Figueroa:
This particular family, they were heavily underwater. So there was not a penny of equity.

Scott Schang:
So I mean, just a normal person, just hearing that, I mean … It kind of breaks you a little bit inside. I mean, you keep having things over and over and over again. How on Earth do you find a ray of sunshine in that type of a situation where they literally, they’re losing their house, they don’t have any equity in the house. They have all of these bills, they have all of this stuff. What solution did you come up with for them?

Dustin Figueroa:
So for this family, when I got into real estate it was 2009, and I remember working in those days before I got my license. I did work with some investors who would purchase properties at auction or whatever the case may be as foreclosures.

So when I walked into homes in 2009 and 10, mainly 2009 before 2011 started getting into the whole short-sale world, but I remembered going into these homes where you would just look at the walls, the floors, the condition of the home, everything was either vandalized or ripped out of the home or stolen.

We would have to go in with ways of protecting ourselves because we never knew who was going to be home when we went into these vacant properties that were foreclosed on.

Dustin Figueroa:
So we made sure that we were armed and made sure that we, not with guns or anything, but we did have some items to help us. Just in case.

Scott Schang:
Be aware of your surroundings.

Dustin Figueroa:
Very aware of our surroundings.

Scott Schang:
And you brought Pablo because he’s the muscle.

Dustin Figueroa:
Exactly. There you go. So we’d just swing Pablo around and throw people at him. No. So I remember in those days it was something that I always remember walking into a home that just the railings going upstairs were ripped out.

It was gutted. It was awful. It was terrible. It was in most cases, disgusting, honestly. There are so many things that you would see in these homes that you just wish that you could have the walls tell you what happened here.

Dustin Figueroa:
So remembering those days and basically bringing that memory with me to these appointments when I see these clients is I know I need to do something to help them avoid that. To help not only the homeowners but for the house to not go through that phase is my only job.

To make sure that I’m there to help them avoid foreclosure and walk away with the best possible scenario that they can because when you do a short sale, I do my best to fight for cash relocation assistance and negotiating that for my client. So that way they A, avoid foreclosure.

They don’t take as hard a hit on their credit report and B, we can try to negotiate some money for them because a few thousand dollars, $5,000, $10,000, it may not sound like a lot, but for someone who really doesn’t have anything or they’re way underwater, that makes a world of difference for them when they’re just trying to move somewhere to get started, to have a fresh start, to alleviate themselves of all this debt that they know they’re never going to be able to pay back.

Dustin Figueroa:
In this case, I think this house was nearly $800,000 owed on a property that at the time was maybe worth half of that.

Scott Schang:
Five, six. Yeah. Over five. Yeah.

Dustin Figueroa:
Yeah. So there was no coming back from that and the homeowner was one of the coolest guys that I’ve met. Smart, smart man, smart man. He worked as an engineer for some aerospace company. I can’t remember which one, but I would go into his garage, and it was like going back in time, seeing all his trinkets, and gears, and robotic devices and everything that this man knew about technology and aerospace and everything. It was really fun and neat to learn things from him, and you can tell he was very passionate about his work and where he came from and what he did.

Dustin Figueroa:
But unfortunately because of his health condition and as well as the situation with his wife, because you can tell they were a very passionate couple. They loved each other very much. They cared about each other very much. It’s just one of those things that you make sure that you do your part and you assess and go over everything with them.

The good, the bad, the ugly of what we can or cannot do. Because I do my best to set a level of expectations. So that way everyone knows, based upon my experience, based upon how many I’ve done and what I think we can do for you, here’s what I think what we should be able to manage for you.

Dustin Figueroa:
Sometimes it’s better, sometimes it’s a little worse, and most of the time I’m pretty spot on with where we think we’re gonna be. But it is, again, always a scenario that’s better than just simply letting the home go into foreclosure.

Scott Schang:
And the really, really hard thing about short sales is short sales, everyone who’s owed money literally has to all get on the same page and agree to accept less than what is owed to them, at least in terms of the lenders. And then I would imagine the tax liens needed to be paid first before the lenders did.

Dustin Figueroa:
Not necessarily. So a lot of what some … and maybe I don’t know if a lot of people know this or not, but federal tax liens, if you’re doing a short sale, you are able to ask the IRS to say, “Hey, could you remove these liens from the property?” They’ll still follow the homeowner. They’ll still be there, but they will allow the sale to go through and they won’t collect a penny.

Scott Schang:
Wow. I didn’t know that. So you went in, you negotiated with both the lenders. I don’t know if you learned of the IRS thing on this deal or on a previous deal that you were able to use that [crosstalk 00:14:40].

Dustin Figueroa:
Oh no, previous deal. Yeah. That was many moons ago.

Scott Schang:
So you got both lenders to agree.

Dustin Figueroa:
Correct.

Scott Schang:
And did you say you were able to give them money to help them move into a new home as well?

Dustin Figueroa:
Oh yeah. Absolutely.

Scott Schang:
How much were you able to get them?

Dustin Figueroa:
In those days we had something called HAFA, or a home affordable foreclosure alternative. They allowed for $10,000 in relocation assistance to go to the homeowner.

Scott Schang:
And so you got them $10,000 to relocate.

Dustin Figueroa:
Correct.

Scott Schang:
Dude, that’s amazing. That’s amazing.

Dustin Figueroa:
And this file, I think if I remember correctly, I think we worked it for nearly seven months. It took nearly seven months to get everybody on the same page.

Scott Schang:
So part of what you had to do is you kind of had to contact both the lenders and say, “Hey, pump the brakes on this NOD thing. Give me some time to work this out.” And the lenders were okay with that because they knew they were working with somebody that knew what they were doing.

Dustin Figueroa:
Exactly. I always tell everybody, think of lenders like people.

Scott Schang:
Hey, we’re people man.

Dustin Figueroa:
Yeah, yeah. Lenders are people too. Yeah. With that in mind, let’s say how about servicing companies, lenders or debt collection companies.

Scott Schang:
Because at the end of the day you’re talking to a person that works there.

Dustin Figueroa:
Yeah. You’re talking to a person that works there and that’s the funny thing is that depending on which servicing company, some companies are so big that you’ll never talk to the same person twice and others are so small and independent where you only have one person to talk to and everything in between.

Dustin Figueroa:
So I tell my clients, these servicing companies, or these debt collectors, these banks, whoever is doing the foreclosure, they’re a lot like people in a sense of personality. No two banks are going to follow the same, let’s say the level of flexibility with how much they’re willing to work with us.

Dustin Figueroa:
So in this case, I knew that we were dealing with two lenders that were really good, pretty good compared to most. And knowing that as long as we, I always say it’s like a rubber band, as long as we stretch that rubber band to a point where I A, I can help them buy a little time because A, the process does take time. A short sale doesn’t happen in a week or two or 30 days, especially when there’s a lot going on.

Dustin Figueroa:
But at the same time, it does help-

Scott Schang:
I remember them taking years back then, those days. I remember them taking years.

Dustin Figueroa:
Oh yeah. Yeah. In the beginning. Yeah, exactly. In the beginning when these banks were training tons of new employees how to service our calls from agents about, hey, what do we need to do to get this short sale off the ground? So this was kind of towards the tail end, once banks kind of caught wind and their employees were way better trained than when short sales first came into play.

Dustin Figueroa:
So because there’s a lot going on with this file and especially the IRS and removing that lien, it does take some time to work it out. There’s a lot of things that go into it and yeah, it took that amount of time, which was okay for everybody. It was okay for the buyer.

The buyer got a great deal. It was okay for the seller because it gave the seller time to pack, figure out where they were going to move to, what they were going to do. As well as making sure that-

Scott Schang:
[inaudible 00:18:12].

Dustin Figueroa:
They did get that relo money.

Scott Schang:
And got them a little bit of time. Got them to know what the time frame looked like for when they had to move, and you got them some money. Do you know how they’re doing now?

Dustin Figueroa:
Yeah.

Scott Schang:
Do keep in touch with these folks? Is their health better?

Dustin Figueroa:
So they moved out of state and after they moved out of state, I haven’t kept too much in touch with them. They were temporarily living with family before they decided to say, “Hey, we’re out of California and you know, thanks again for everything, Dustin.”

I told them, “Hey look, I’m always here. If in case you ever want to make your way back, give me a call, let me know how things are doing.” But after they left out of state, we don’t really keep too much in touch.

Scott Schang:
Well and here’s the good news about their particular situation, ’cause once again, you prevented the notice of default. You ended up doing a short sale, which in almost all cases is a shorter waiting period than a foreclosure before you would be eligible to buy a new home.

So like you said, they’re getting in their retirement years, they’re getting in their golden years. Yeah, I guess you called it. They don’t want to have to deal with this stuff, but it’s literally 36 months. It’s three years for them to be able to buy with FHA, four years to use a conventional loan.

Scott Schang:
And out of California, they could probably buy a much nicer house for about a quarter of the price and hopefully live their retirement years feeling great about what happened.

Scott Schang:
So that’s another great success story, man. I appreciate you sharing that with us and yeah, I look forward to the next story.

Dustin Figueroa:
Thanks. It was good.

Scott Schang:
So we’re going to sign off here. Great job and we’ll see on the next story.

Dustin Figueroa:
All right. Take care everyone.

Scott Schang:
Thanks. All right.

Dustin Figueroa:
Thank you. Bye.

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Scott Schang

A 20 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on https://findmywayhome.com since 2007
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