The Home in Foreclosure

            Many Americans have lost their homes during this tough economic time.  Many of them have been victims of bad loans.  The adjustable rate mortgage allowed many people to purchase homes that they couldn’t afford by offering them a lower rate initially and then readjusting later to a lot higher rate.  Some had creative lending solutions where they took loans with higher interest rates because of poor credit in the hopes that they would be able to refinance later.  The worst losses were those of the people that made their payments on time every month and lived within their means, but do to a job loss fell behind on their payments.

            Many of these homes could have been saved from foreclosure if the homeowner had known what to do.  There were some things that could have been done to save their homes.  If the house can’t be saved there are some alternatives to foreclosure.

  1.  Contact the mortgage company.  As soon you find out you are having a problem paying your mortgage you should contact the mortgage company to see if there is any assistance they can give you.  Let them know if you believe this is a short term problem or if you need a permanent solution.
  2. Ask for a loan modification.  Go to your bank, mortgage or lending institution website and see what types of loan modifications they offer.  Also look at the federal programs available like the Home Affordable Refinance Program (HARP).  Check to find out if you qualify for any of the programs.  If so, complete all of the paperwork and provide it to the company.  This will help you to get your modification accepted and in place quicker.
  3. Save your money.  If the bank tells you to stop making payments until they complete the loan modification, save your money.  This will help you if the bank comes back and tells you that you need to pay an upfront amount to complete your loan modification.  Don’t make additional debt with the mortgage money.  This will only complicate your situation and could make you ineligible for the modification.
  4. Don’t get scammed.  There are many companies out their claiming to assist you with doing a loan modification.  Never pay anyone money to do something that you can do yourself for free.  Many people have lost thousands of dollars in an effort to save their home by hiring one of these companies.  They find out months later that nothing has been done to assist them and they end up losing their homes.
  5. Adhere to the loan modification agreement.  Once you are granted the loan modification, make your payments as agreed.  If you fail to make the payments you could end being disqualified for the modification.
  6. Short Sale.  If you cannot qualify for a loan modification look into doing a short sale.  This will have less of an impact on your credit and will help you to get out of the home.  Understand that with a short sale you and the bank must be in agreement on the sale price.  This could be a long process however, the banks are moving a lot faster these days to complete short sales.  This is a good option if you are underwater in your mortgage.
  7. Deed in Lieu of Foreclosure.  If you have decided that you are ready to give up your home and want to move on, you can do a deed in lieu of foreclosure.  A deed in lieu is when you voluntarily transfer ownership of your property to whoever owns your mortgage in exchange for being released from the mortgage debt. 

Whatever happens once you get behind is mostly up to you.  Ask the bank or mortgage company for the help that you need and you may be able to save your house.