How to Avoid Foreclosure
 

If you are at the stage where you are wondering how to avoid foreclosure, you must be behind on your mortgage payments or know that you will not be able to make your payments in the future. Here are a few very important FAQ's:

Q: What happens when I miss my mortgage payments?

Foreclosure may occur. It is the legal means that your lender can use to repossess (take over) your home. When this happens, you must move out of your house. Additionally, if your property is worth less than the total amount you owe on your mortgage loan, you could be pursued by your lender for a deficiency judgment. If that happens, you not only lose your home, but there also would be an additional debt that you would owe to your lender.

Foreclosure or a deficiency judgment could seriously affect your ability to qualify for credit in the future. So you should avoid it if all possible!

Q: What should I do?

1. DO NOT IGNORE THE LETTERS FROM YOUR LENDER. If you are having problems making your payments, call your lender without delay. Clearly explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without such information, they may not be able to help. Be polite and be up front. The last thing a lender wants is to take back a property through foreclosure.
2. Stay in your home for now. You may not qualify for assistance if you abandon your property.

Refinance with a sub-prime lender. Your credit is poor right now because of the mortgage delinquencies. This means most or all of the traditional banks will not work with you. However, if there is equity in the property, you may be able to refinance -- at a higher-than-normal rate. These are called sub-prime loans, and they're increasingly common: About 20 percent of mortgages today are sub-prime. We do offer this type of loan, and would be more than happy to answer any questions you may have to keep you in your home.

 Q: What are my alternatives?

Your options may include the following:

Special Forbearance. Your lender may be able to arrange a repayment plan which would be based upon your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced an involuntary reduction in income or an increase in living expenses. You must have also furnished information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This will help you catch up by possibly reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem but your net income is less than it was before the default (failure to pay).

Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but it will help your chances of getting another mortgage loan in the future. You may qualify if:

1) you are in default and don't qualify for any of the other options;
2) your attempts at selling the house before foreclosure were unsuccessful;
3) you don't have another mortgage in default.

 Q: How do I know if I qualify for any of these alternatives?

Your mortgage professional can help you determine which, if any, of these options may meet your needs.

Q: Should I be aware of anything else?

Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If you're selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your financial difficulty. Be especially alert to the following:

Equity skimming. This type of scam involves a "buyer" approaching you and offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember that signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.

Q: Are there any precautions I can take?

Here are several precautions that should help you avoid being "taken" by scam artist:

1. Don't sign any papers you don't fully understand.
2. Make sure you get all "promises" in writing.
3. Beware of any loan assumption where you are not formally released from liability for your mortgage debt and contracts of sale.
4. Check with a lawyer or your mortgage professional before entering into any deal involving your home.
5. If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state's Attorney General, the State Real Estate Commission, or the local District Attorney's Consumer Fraud Unit for this type of information.

Q: What are the main points I should remember?

1. Don't lose your home and damage your credit history if you can help it.
2. Call your mortgage lender immediately.
3. Stay in your home to make sure you qualify for assistance.
4. Cooperate with the lender trying to help you.
5. Explore every alternative to losing your home.
6. Beware of scams.
7. Do not sign anything you don't understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.
8. Act now. Delaying can't help. If you do nothing, YOU WILL LOSE YOUR HOME and your good credit rating.
9. Call us today. We’ll be more than glad to assist and answer any questions you may have. There are no fees for this service.