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Help for a Foreclosure - 8 tips for how to avoid losing your home
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Is your adjustable rate mortgage getting ready to adjust, or has it already? Has your monthly mortgage payment just increased and now you are having trouble making the payments? If you are having trouble keeping up with your monthly mortgage payments, this information is for you. Have you received any correspondence from your lender asking you to contact them? If you are having difficulty making your mortgage payments, the Department of Housing and Urban Development and myself have the following advice:
1. Do not ignore the problem. You never know what you will be able to work out, so do not get stopped by the circumstances. Do not be afraid to reach out for help. There is no point in suffering in silence. You would be surprised at the options that are available.
2. Contact your lender as soon as you can. Most lenders have options to help borrowers through the rough financial times. Believe it or not they do not want your house back. They are not in the real estate business; they are in the lending business. Taking property back is expensive and time consuming for them. They will usually do whatever they can to help you out of a tough situation. One option is a forbearance, or work out plan. This option is simple, the lender provides this option if you get behind in your mortgage payments a few months and can make an elevated payment. The lender will add up your past due amounts and apply it to your next 6 months worth of payments to get you caught up.
3. Know what your mortgage rights are. Look for your loan documents that you originally signed so you can see what actions your lender can take against you in the event of a default. If you do not understand them, find someone who does.
4. Educate yourself on foreclosure prevention options. You can go to www.fha.gov/foreclosure/index.cfm. Contact a HUD approved home counselor in your area. HUD may be able to provide a free or low cost home counselor. Call 1-800-569-4287.
5. Another option is to call the Neighborhood Assistance Corporation of America, NACA (www.naca.com). NACA is a non profit organization that gives lower than market interest rates to homeowners that are in financial distress. The typical rate is 1% below the prevailing 30 year fixed interest rate. They may also be able to work with your lender to work out new terms for your note that are more affordable. Often they can reduce your interest rate as well as lowering the amount of principal that you will have to pay back.
6. Drastic as it may seem, bankruptcy may be an option. The two most common types of consumer bankruptcies are Chapter 7 and Chapter 13. In brief, Chapter 7 bankruptcy is where you “write off” everything and walk away from your debt. There are several things you can keep if you’re in good standing like your home and your car. But if you are behind too much, you might consider walking away from all of it and starting over. Filing a Chapter 7 bankruptcy will only temporarily stop a foreclosure. Your lender will most likely file a “relief from automatic stay” from the bankruptcy court. If they get this, and they probably will, they will keep going with the foreclosure. A chapter 13 filing is a repayment plan. You put your credit accounts into a repayment plan and pay back your creditors some portion of what you owe them until the plan is completed either 3 or 5 years later. If your house is in this plan, as long as you make your payments to your bankruptcy trustee, you’ll keep your house.
7. You must also be realistic about your spending. Do you really need the $650/mo. car payment? You may need to let the unsecured debts go for awhile. Be sure to keep up on your health care and mortgage payments. You may want to look at selling some of your personal property. A lot of people are making a lot of money selling stuff on ebay.com or craigslist.com. You may want to see if you can get help from friend or a family member. A second job may be in order to bring in additional income.
8. Be on the look out for foreclosure prevention companies. They will start knocking on your door. They are usually only after one thing. They are either looking to steal the equity in your property or stick you in another high rate of interest loan. These types of loans are usually just a temporary fix which will lead you to the same place that you are already in.Don’t lose your property to a foreclosure recovery scam. Never sign any legal instrument without a full understanding of what you are signing
In summary, if you are threatened with a foreclosure from your lender, call your lender and see what you can work out, get advice from a trusted real estate professional, attorney, NACA advisor or a HUD approved counselor. If you think you are a victim of predatory lending, file a complaint with your state banking entity or department of financial institutions. For more details on scams and what you can to do prevent being a victim go to the following website, www.hud.gov.
Dave Mason has been in the Real Estate, Consumer Finance and Mortgage industry for nearly 18 years. He has a degree in Finance from the University of Arizona.
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