Take Steps To Save Your Home

A loss of a job, medical expenses and other life-altering occurrences can happen to anyone, causing us to fall behind in our loan payments. If we neglect paying our credit cards it hurts our credit rating; if we neglect our home loan payments the lender will foreclose, and repossess our home.

We are often embarrassed to talk about our money problems, but that approach doesn't solve anything. Put your pride on hold and get serious about avoiding foreclosure.

Contact your lender as soon as you know your payments will be late. Never ignore the lender's letters and do not assume you are in a hopeless situation. Lenders do not want to foreclose, and will usually work with you to get your account back on track.

Solutions for Temporary Problems

Reinstatement
When you are behind in your payments but can promise a lump sum to bring payments current by a specific date.

Forbearance
You are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current. Lenders sometimes combine Forbearance with Reinstatement if you know you'll have the funds to bring your account current by a specific date.

A Repayment Plan
If your account is past due, but you can now make payments, the lender may agree to let you catch up by adding a portion of the past due amount to each current monthly payment until your account is current.

Solutions for Longer-Term Problems

Mortgage Modification
If you can make your regular payment now, but cannot catch-up the past due amount, the lender may agree to modify your mortgage. One solution is to add the past due amount into your existing loan, financing it over a long term.

Modification might also be possible if you no longer have the ability to make payments at the former level. The lender might modify your mortgage to extend the length of your loan, or take other steps to reduce your payments.

Selling Your Home
If catching up is not a possibility, the lender may agree to put foreclosure on hold, giving you some extra time to attempt to sell your home.

Deed in Lieu of Foreclosure
The lender may allow you to give-back your property, in turn forgiving the debt. This does negatively affect your credit record, but not as much as a foreclosure. The lender may require that you attempt to sell the house for a specific time period before allowing this option; the option may not be possible if there are other liens against the home.

For FHA Loans
The lender might be able to help you receive a one-time payment from the FHA Insurance fund. You may qualify if your loan is at least 4 months but no more than 12 months past due and you are able to begin making full mortgage payments.

The funds must eventually be repaid. You will be asked to sign a promissory note and HUD will place a lien on your property. The note is interest free, and can stay attached as a lien that becomes due when you pay off the first loan or when you sell the property.

For VA Loans
Financial counseling designed to help you avoid foreclosure is available at VA Regional Loan Centers. Call 1-800-827-1000 and ask for the phone number of the Loan Service Representative that can assist you.

An Alternative, HUD-Approved Counselors

If you don't want to talk with your lender first, contact a HUD-approved counseling agency. A counselor can help you determine which options might be available to you and negotiate with your lender to work out a repayment program. Call 800-569-4287, weekdays between 9:00 am and 5:00 pm Eastern Standard Time, or find an approved agency on the Web.

Nothing is Automatic, Nothing is Guaranteed

Your lender won't put you into a program to bring your loan up-to-date unless you provide them with the documentation they require to analyze your financial situation. Solutions are possible, but be prepared to work with and stay in contact with your lender.

Working With Your Lender

Although lenders do not want to foreclose if it can be avoided, they do want to make sure you can follow-through on any promises you make to bring your account current.

Be prepared to share all details about your financial situation with your lender.

• An explanation of your current financial circumstances.
   
• Details about your current income, including pay stubs, statements regarding unemployment, disability, social security, retirement, public aid, or other similar documents.
   
• A list of your household expenses.

The lender will probably ask you to fill out documents that detail your specific situation. They will review and analyze the documents before offering a solution to bring your loan up-to-date. If the lender sends you a packet, turn it around quickly and answer all questions honestly.

Preserving Your Good Credit

If your home loan is past due, your other obligations probably are too. A nonprofit credit counseling agency may be able to help you work with your creditors to reduce your monthly payments by lowering interest rates or extending repayment periods.

The key word here is nonprofit. Steer clear of companies that promise you quick, easy results for all of your credit problems--if you pay them a large fee. You know better; that's not how it works in the real world. The National Foundation for Credit Counseling is a good place to start. Also, www.foreclosurefish.com