Hopefully by now, every struggling homeowner knows there are options to foreclosure, such as a short sale, refinancing or getting a loan modification.

As Rick Sharga, SVP at foreclosure data provider RealtyTrac, explains in this interview earlier this year, three major reasons are fueling the jump in foreclosures across the country.

Click here to view the embedded video.

Meanwhile, one man’s loss is another man’s gain. Not surprisingly, investors and first-time homebuyers are flooding the market looking for bargains. Among the best cities to look? Las Vegas. Sin City had the highest rate of foreclosures of any major city in the first quarter of this year, according to RealtyTrac’s latest report.

And while existing home sales are down 7.1 percent over the past year, the National Association of Realtors says more than half of the homes that were bought in March were snatched up by first-time buyers.  Hmmm, must be that $8,000 federal tax credit everyone’s talking about. Wish I could get in on that, but I bought a condo in 2007.

For tips and advice on how to work the foreclosure market, check out FrontDoor.com’s Foreclosure Buying Guide.

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Lenders will receive financial incentives to modify mortgages of at-risk borrowers who have not yet missed payments and to remove second liens on loans. You can modify through Dec. 31, 2012.

Eligibility:
*  Loans originated on or before Jan. 1, 2009
*  First-lien loans on owner-occupied properties with unpaid balance up to $729,750. No investor-owned, vacant or condemned properties.
*  Borrowers must show a recent tax return and two pay stubs and sign an affidavit of financial hardship.

The plan sets industry-wide standards for modifying a home loan, including using a “net present value” (NPV) test to determine the benefit of a loan modification. This test includes ways to determine property value, assume home price appreciation and estimate foreclosure costs.

Under the plan, a borrower’s monthly payment must be reduced to no more than 31 percent of gross monthly income.

To do this, the lender must go through a series of steps:
1) reduce the interest rate, at a floor of 2 percent
2) extend the life of the loan for a maximum of 40 years
3) forbear principal (i.e. offer interest-free forbearance on part of the principal)

Check with your lender to see if you qualify.

And don’t forget that borrowers with mortgages held by Fannie Mae and Freddie Mac are also eligible to refinance through June 2010.

Stay tuned for more exclusive real estate news, only on FrontDoor Unlocked!

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