By Jim Perez,
DebtHelp, Inc. Staff Writer
Here at DebtHelp.com, our Super-Freak-O-Nomics team gets asked the same question all the time:
How do I keep from losing my home in foreclosure?
With all the bad loans out there made during the subprime march to madness, and the subsequent bursting of the credit bubble, we understand the concern.
So here are some tips for those of you who may be among those millions whose ARMs are about to be broken.
From the U.S. Department of Housing and Urban Development:
1. 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.
Note from Super-Freak-O-Nomics: Lenders want to see that you are committed to repaying your loan. They are far more likely to negotiate with the borrower who has been making partial payments, then the borrower who just stops paying all together. You need to show that you have the full intent of keeping your house, your mortgage, and satisfying the legal agreement you made to pay for your house.
2. 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.
Note from Super-Freak-O-Nomics: Lenders do not want to be landlords. It makes good business sense for them to help you keep your home. They hate cutting the grass and unclogging backed-up toilets just as much as you do.
3. Open and respond to all mail from your lender.
The first notices you receive will offer important information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notices of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
Note from Super-Freak-O-Nomics: You may also find that not everything in those letters is completely negative. Your lender may list available options for you to avoid foreclosure, but if you don't open the letters, you will never know.
4. Know your mortgage rights.
Find your loan papers and read them so you know what your lender may do if you can't make your payments. Every state has different laws, so learn about the foreclosure laws and timeframes in your state by contacting your state’s Government Housing Office.
Note from Super-Freak-O-Nomics: It may seem intimidating to have to read through all the fine print, but to be completely honest, you should have read all of this in detail when you signed your mortgage anyway. This will be a refresher to remember the exact terms. Plus, understanding timelines is very critical when you are talking about the roof over your head; 30 days VS 90 days can be a lifetime when you are at risk of being homeless.
5. Understand foreclosure prevention options.
Valuable information about foreclosure prevention options, also called loss mitigation, can be found on the internet at www.fha.gov/foreclosure/index.cfm.
6. Contact a HUD-approved housing counselor.
The U.S. Department of Housing and Urban Development 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 assistance. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.
Note from Super-Freak-O-Nomics: In this time of need there is nothing to be embarrassed about when it comes to reaching out for help. We are talking about your home here!
7. Prioritize your spending.
After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses – cable TV, memberships, entertainment – that you can eliminate. Delay payments on credit cards and other unsecured debt until you have paid your mortgage.
Note from Super-Freak-O-Nomics: Personal and unsecured debts should be the last thing you should pay when you are at risk of losing your house. Your health and home should supersede all other expenses. If you are still paying for a cell phone, cable TV, internet, etc... and you are about to lose your home, you need to drop those expenses immediately and put that money toward your mortgage.
8. Use your assets.
Do you have a second car, jewelry or 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.
Note from Super-Freak-O-Nomics: Think about how much money you have pored into your house. For many people facing foreclosure they are at risk of losing $20,000-80,000 or more dollars in lost payments and equity when there house is foreclosed. Is it really not worth it to sell a life insurance policy, a car, or other smaller value item to save the tens of thousands you have pored into your house?
9. Avoid foreclosure prevention companies.
You don't need to pay fees for foreclosure prevention help; use that money to pay the mortgage instead. 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 the equivalent of two or three months mortgage payment, for information and services your lender or a HUD approved housing counselor will provide free if you contact them.
Note from Super-Freak-O-Nomics: You are the best link between YOU and THE BANK. If you are falling behind and facing foreclosure its almost guaranteed you will be contacted by one of these companies. Proceed at your own risk if you do choose one.
10. Don't lose your house to foreclosure recovery scams.
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home. 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.
Note from Super-Freak-O-Nomics: If it sounds too good to be true, it probably is. Its amazing how accurate the rule tends to be and in this case it's almost always correct. Do not sign anything until you have had proper time to revue it or have a lawyer review it for you. When people are down and out, this is the time where you will find the most unscrupulous and devious companies come out of the woods to "help you out". Proceed very carefully.