Tips to Avoid Foreclosure

Many are facing a situation that has become the “norm” in the last few years and that is the potential of having our homes foreclosed upon at any time. You purchased a home a few years back, refinanced when you thought the time was right, and now you can’t keep up with the payments, and, the property has dropped in value putting you “underwater.” You might be one of the millions of at-risk people with a sub prime adjustable rate mortgage (ARM) whose interest rates will soon reset to much higher percentages in a short time, or you have a different more un-conventional type of loan. You may even have your mortgage payments up to date but are worried about getting layed off soon.  “A good portion of the people we see are folks who received loans they never should have gotten in the first place,” say many credit counselors. Many states have also posted advice for distressed homeowners on their attorney general, banking department, or housing finance agency websites.

Don’t get into any more problems due to the lack of knowledge. The reason many Louisville homeowners end up in problem loans is that they either did not understand the terms of their loans or were duped by predatory lenders, or did not actually qualify for any mortgage loan to begin with.

Call your lender while your head is still above water. If your credit is already in the tank, you will have no negotiating power and most of the new programs that help to head off foreclosure are for those with decent credit ratings.

Lenders are saying that they are sending out notices to those with sub prime mortgages to offer assistance.

You cannot get this resolved with one phone call. Too many people are expecting to be able to solve their mortgage problem with a “quick fix.” Don’t forget that it is to the benefit of the lender also to help solve the problem.

Locate a free or low-cost housing counselor. Go to the U.S. Department of Housing and Urban Development website to find HUD-certified counselors. Neighbor-Works America, a national nonprofit created by Congress, supports a well-publicized national hotline, 888-995-HOPE; it promises to connect you to a live counselor. Get a qualified expert to help you navigate through this problem. You may want to take action on several fronts by contacting a lawyer as well. Don’t go to places that advertise a fix on TV, the Internet, or telephone poles. Check to see if you’re eligible for special assistance, because if you have an adjustable-rate mortgage and a good credit rating there are many options available.

Bankruptcy can slow or halt foreclosure in some cases, but you need to seek legal advice from a trusted source, like a credit counselor, before you proceed. Bankruptcy judges are not permitted to restructure debt owed on a mortgage covering a primary residence. Many of the so called “Mortgage help programs” will only apply to those with good credit.

When you're behind on your mortgage payments, you don't hear from your lender until you are 60, even 90 days late. With credit cards, as soon as you miss a payment, they will call and harass you day and night so most people will tend to let the mortgage payment go and pay their credit card bills. Credit counselors will advise homeowners to put off the credit card companies and pay their mortgage payment first.

Try getting rid of some luxuries you now have and when you sit down with your lender, they will see that you have done everything you can to help your situation. Get rid of your cable, cash in some assets like expensive jewelry and cars.

Draw up a detailed accounting of your expenses and organize your pay stubs, benefit statements, and tax returns. You will need these records when you talk to the bank. Get familiar with the different lender programs that your lender offers and go for a long term, low interest loan at a low rate. The problem is that if your credit score has dropped or you now don’t qualify, you will not be able to save the house. All lenders have tightened up their requirements to get a mortgage loan of any kind. Be careful about accepting any repayment plan put forth by your lender. Sometimes they only forestall the inevitable. Try to get a loan modification if possible.

If all else fails, giving up your house may be the only thing you can do. If you are underwater, ask your lender about allowing you to try to sell the house for what is owed on it. They may or may not agree to this. This will also save the lender some costs and it might help to save your credit. You can also bail out of the situation by surrendering your deed to the bank before your lender actually files for foreclosure. If your lender accepts your offer of a “deed in lieu of foreclosure,” as this option is known, you voluntarily transfer title, move out of the house, and on with your life. You avoid the foreclosure, avoid a sheriff's sale of your home, and then your eviction. Your credit rating will still take a hit, but you will dodge the foreclosure bullet and all of the tension that a foreclosure puts on you and your family.

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