Authored by Kate Beswick in Real Estate
Published on 11-17-2009
For homeowners, the worst F-word possible is ‘foreclosure.’ Foreclosure occurs when a homeowner defaults on their mortgage and the bank takes back the home, forcing the owners to leave. Not only does foreclosure mean that the owners no longer have a home to call their own, but it also means that there is now a black mark on their credit history that will be very hard to overcome. Stopping foreclosure is very important for many reasons and here, we’ll show you how to do it!
The first thing you need to do when facing foreclosure is determine what got you in this predicament in the first place. Get out all your financial documents including bank statements, loan documents, and expenses. Using these records, try to determine what exactly what wrong and why you are now facing foreclosure. Are you overspending in your monthly budget? Do your loan terms not really reflect what will benefit you the most? Finding the source of the problem is important before doing anything else.
Once you’ve discovered the reason why you’re facing foreclosure, it’s important that you call your mortgage lender and explain the situation. If there are circumstances that have caused you to be low in funds on a particular month, lenders are usually quite willing to work with you to either redistribute the missed payments over the next several months, make up the payment with one large payment, or they may even freeze your payments until you are able to resume making payments.
In some cases, the lender may actually suggest that the current loan be reevaluated and redistributed so that you are better able to make timely payments. This can be done by lowering the monthly payments and extending the life of the loan. So you’ll be paying your mortgage off for longer but will be making smaller payments over that time. Interest rates can also be tinkered with so that the loan will work better for you. This can be done by either lowering the interest rate altogether or from modifying the interest rate from an adjustable rate to a fixed rate.
A housing counselor can also help stop foreclosure on a home. Housing counselors work with you to assess the amount of the loan, and the time that you have to make up the missed payment before the lender forecloses on the home. Housing counselors can also be great assets when it comes time to prepare a hardship letter to the lender, explaining the circumstances and the reasons for missing any mortgage payments. Housing counselors can also help examine spending habits and find areas where cutbacks can be made to make paying the mortgage much easier.
It’s important if you need a housing counselor to help that you find a reputable one. There are many scams under the broad term ‘housing counselor’ where the counselor will simply come in and guarantee that the lender won’t foreclose. They then will take their fee, which is hundreds or thousands of dollars, and never be heard from again. The U.S. Department of Housing and Development has a list of reputable counselors on their website that will actually help to keep you in your home, instead of running you out of it faster!
With the real estate market and industry standards changing, banks and other lenders are more inclined to keep you in your home rather than foreclose. The most important thing you as a homeowner can do to stop foreclosure is to talk to your lender and be honest with them about your situation. The chances are, they want you to keep your home just as much as you do!