If you are losing your home to foreclosure, realize that thousands of others are in the same situation. As things look now, thousands more will lose their homes before the economy gets better.
The Foreclosure Problem
The increase in foreclosures began with the subprime mortgages that ultimately led to the mortgage melt-down. Many are placing the blame on the mortgage industry; however, no one could have predicted this. The adjustable rate mortgages, known as ARMs were one example of creative financing methods that were great for some people. The benefits of this plan included 100% financing at a low interest rate that was only fixed for 3 years. The plan was to refinance before the ARM reset and rates were increased.
Unfortunately, the economy took a devastating downturn. With unemployment on the rise, many people lost their jobs and defaulted on their mortgage; therefore, they were unable to qualify to refinance their home. Now, they are stuck with a mortgage payment that they cannot afford. In addition, real estate market values declined sharply, making homes unable to appraise for anything near the amount owed on the mortgage; therefore, another roadblock to refinancing.
To Make Matters Worse
The devastation continues as people are walking away from their homes. Investors are taking a huge loss and mortgage guidelines are getting strict. Even people with very high credit scores are finding it difficult to get a new, fixed rate mortgage.
If you think that this can only happen to dead-beats, think again. Responsible, hardworking people are facing foreclosure every day. They are devastated; they feel helpless and they just dont know where to turn for help. They are overwhelmed with credit collection letters and phone calls from their lenders demanding that they make their payments.
To add to the confusion, they receive letters from lawyers or other companies promising to save your home from foreclosure or stop foreclosure now. Some of these companies are somewhat reputable, but many are preying on your last dollar as they demand an up-front fee for a service that gives you false hope and ultimately does not provide a solution. Generally, a reputable company will not approach you, call you, or send letters to offer their services. This is the behavior of a predator that got your name from a foreclosure list that they subscribed to.
Foreclosure Help
Now that we know how we got into this situation its time to find a solution to the problem. You might just walk away. This is what a lot of people are doing; however, it should be the last resort. Foreclosure is very damaging to your credit and it takes a long time to be removed from your credit report. In some cases, walking away is the only option, but there are other options to consider.
Some lenders are open to discussing a loan modification plan to make the mortgage more affordable. They may reduce your interest rate or amortize your payments over a longer term. Ive even heard of cases where the lender stopped the foreclosure process and reduced the balance owed, allowing the homeowner to start fresh with a brand new mortgage. This practice was not common years ago; however, things have changed drastically and lending practices have followed suit.
You might try selling your home, even though it is likely that you owe more than it is worth in todays market. There is a good chance that your lender will accept what is called a short sale, where they agree to take less than what is owed to them. Many lenders realize that they can cut their losss by taking a short payoff now, rather than waiting out the foreclosure process, evicting the homeowners and listing the house for sale. They stand to lose more money as the market values continue to decline.
A borrower can contact their lender to begin discussing loan modification or negotiating a short sale; however, many just dont know how to go about it. They are emotionally drained, stressed out and they do not know how to present their case. There are reputable companies who are professionals at handling these negotiations for a reasonable fee. - 23687
