Along with the rest of the country, our area is experiencing a high rate of home foreclosure. Fortunately, even in tough financial times, foreclosure can often be avoided. Lenders are generally willing to work with homeowners to avoid foreclosure. Foreclosures cost lenders time, effort, and a lot of money.
When a home is foreclosed, the county sheriff sells the property at auction. Since the lender usually has a good deal of money wrapped up in the property, a representative is generally in attendance to bid on the property.
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Once the lender's representative has purchased the property at sheriff's sale, the property is inspected and listed with a local real estate professional. Foreclosed properties usually do not sell for market value. Sometimes, a lender can re-coup losses through the sale of the property, but more often, the lender must file a claim with its insurance company and ask to be reimbursed for the amount lost.
As you can see, a lender has to put more money into the property just to re-coup its losses. So, lenders are generally very happy to work with a homeowner to avoid foreclosure.
One possible alternative to foreclosure could be a short sale. Because of the costs and hassles involving with foreclosures, a lender is often willing to accept less than the actual pay-off amount--just to avoid the foreclosure process!
Following are a few steps recommended by the Department of Housing and Urban Development (HUD) for anyone falling behind on mortgage payments:
· "Don't ignore the problem. The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house."
· "Contact your lender as soon as you realize that you have a problem. Lenders do not want your house. They have options to help borrowers through difficult financial times."
· "Open and respond to all mail from your lender. The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court."
· "Know your mortgage rights. Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and time frames in your state (as every state is different) by contacting the State Government Housing Office."
· "Understand foreclosure prevention options. Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov/foreclosure/index.cfm
· "Contact a HUD-approved housing counselor. The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance."
· "Prioritize your spending. Review your finances and see where you can cut spending in order to make your mortgage payment. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage."
· "Use your assets. Do you have assets-a second car, jewelry, a whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home."
· "Avoid foreclosure prevention companies. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD approved housing counselor will provide free if you contact them."
· "Don't lose your house to foreclosure recovery scams! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD approved housing counselor"
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