Home Loans and Mortgages - Tips to Avoid Foreclosure
Today’s real estate market is a volatile one; prices are at record levels and Interest rates are favorable, but foreclosures are increasing. Wages haven’t kept up with home prices and some buyers who had to stretch to find a way to obtain a mortgage in the first place are having trouble making their payments. Usually, if a buyer cannot meet his or her mortgage obligation, the lender forecloses, taking the home and leaving the buyer without a place to live and a tarnished credit record. If you are having problems paying your mortgage, can you avoid this scenario?
Depending on your type of mortgage and your lender, you may have other options. Most lenders, wary of rising foreclosure rates, would rather work out some sort of solution than take your home. Lenders are in the business of lending money, not selling houses, and the process of foreclosure is a tedious one that most institutions would rather avoid. The first thing you should do if you find yourself with a problem making your payments is to call your lender and discuss the matter with them. The sooner you contact them, the more likely you are to work out a solution that’s agreeable to both of you.
Here are a few possible options for buyers who are having temporary cash flow problems:
Your lender may agree to temporarily suspend payments until you are able to resume paying them. Alternatively, your lender may be willing to restructure or refinance your loan.
If your loan is insured by the department Housing and Urban Development or the FHA, you may be eligible for a one-time payment to bring your mortgage payments up to date. For details, contact the HUD or FHA directly.
You may be able to sell your home to pay off your loan. This is clearly not the first choice for many homeowners, but it is a better option than losing your home outright. Rising real estate prices during the last few years have left many homeowners with a lot of equity. You may be able to sell your home for more than you owe, which will relieve your debt and leave you with some cash left over.
Your lender may be willing to simply take the home back, rather than force you out of it. You lose the house, but your credit rating will not likely suffer.
These are just a few choices that may be available to you. Your lender may offer other solutions, as well, so don’t’ hesitate to call them if you find yourself in financial trouble. It is far better to contact the lender and tell them of your problems than to have them call you and ask, “Where is our money?” Be forthright and tell them that you want to work something out, and you may find a solution that allows you to keep your home. It never hurts to ask.
Save My Home!
If you are facing foreclosure on your home, you are not alone! Millions of home owners will lose their homes in the next few years.
Mortgage payments will skyrocket as $1 Trillion dollars of adjustable rate mortgages adjust. Their payments are based on indexes such as the prime rate that will be 3 or 4 times higher than they were when the loans were taken out. In spite of the adjustment caps that most of these loans have, these homeowners will see their payments jump 20-40%.
Once these new payments hit, budgets will be stretched, banjo-string tight. The reason most people took adjustable rate loans was because they could not afford the payments they will now be forced to make.
On top of that, the housing market is already slowing. In many parts of the country, unsold housing inventory is doubling, homes remain unsold for 60 days or more and stocks of home builders are down by 1/3 or more. Prices are falling, even in New York and California.
All this means that these cash-strapped people will no longer be able to refinance to a lower payment. Also, George Bush's new bankruptcy law will prevent them from wiping out their credit card debt to free up cash to pay their mortgage.
Therefore, the slightest interruption of their incomes will put most of these people into a downward spiral which will toss them and their families into the street.
If you or someone you know is potentially in this situation, listen up!
There is help available, if you act at the first sign of trouble. One of the best sources of help, is your lender!
They do not want your home. Industry statistics show that it costs lenders between $30-$50,000 to foreclose and dispose of a house. Banks also get demerits from banking regulators for having non-performing assets (your delinquent mortgage) on their books.
In fact, banks have staffers whose job it is to help you avoid foreclosure. This may not be obvious to you as you attempt to locate them and negotiate a resolution of your problem.
That is mainly due to the fact that you may be dealing with the wrong bank! Just because you send your payments to your bank, does not mean that they own your mortgage. They may be the "servicing" bank, merely collecting payments on your mortgage, which was probably sold the day after your closing. It may have been sold many times thereafter, perhaps ending up in a bundle of mortgages sold to Wall Street or even China!
These entities have their own requirements and procedures for working with delinquent borrowers. Your best bet to Save Your Home is to work with a knowledgeable professional who will know which lender to deal with and how to present your case in the best light.
Your lawyer is a good place to start, but act quickly. The earlier you take action, the more options will be available to you.
Copyright 2005 Bill Young. Bill is a former bank mortgage officer, a personal financial consultant vice president of the Foreclosure Negotiators of America. His website is: http://CantPayYourMortgage.Com
