FOX 4 Real Estate: Avoiding Foreclosure

KC METRO -- Media has given a lot of attention to one aspect of real estate that nobody likes to talk about: foreclosure.

Loosing your job, unexpected medical expenses, and other life-altering occurrences can cause you to fall behind in your home mortgage payments. If you stop paying your home loan the lender can foreclose, taking ownership of your home.

OK, you are facing a financial crisis what do you do to keep your home?
You must do two things: First, don't panic; second, put your pride on hold. The truth is that lenders do not want to foreclose, and will usually work with you to get you back on track.

Rule #1: Contact your lender as soon as you know your payments will be late. Don't be ashamed. This is the best thing to do and the sooner the better.

Rule #2: Never ignore the lender's letters or phone calls. Ignoring the problem won't make it go away. When you do talk to your lender, remember, they want to help you so try to curb your frustrations and anger.

How Do You Start The Process?
Your lender won't automatically put you into a program to keep you out of foreclosure. You must put the plan into motion and provide the lender with the documentation they require to analyze your financial situation before they can offer a solution to bring your loan up-to-date.

Be prepared to share all details about your financial situation with your lender to include:

An explanation of your current financial circumstances.
Details about your current income.
A list of your household expenses.


Short-Term Solutions To Prevent Foreclosure
Reinstatement
Reinstatement might be possible when you are behind in your payments if you can promise the lender a lump sum payment to bring payments current by a specific date.

Forbearance
In forbearance, you are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current. Lenders sometimes combine Forbearance with Reinstatement if you know you'll have the funds to bring your account current by a specific date.

A Repayment Plan
If your account is past due, but you can now make payments, the lender might agree to let you catch up by adding a portion of the past due amount to a certain number of monthly payments until your account is current.

Long-Term Solutions To Prevent Foreclosure
Mortgage Modification
If you can make your regular payment now, but cannot catch-up the past due amount, the lender might agree to modify your mortgage. One solution is to add the past due amount into your existing loan, financing it over a long term.

Modification might also be possible if you no longer have the ability to make payments at the former level. The lender can modify your mortgage to extend the length of your loan or take other steps to reduce your payments.

Selling Your Home
If you do not have a repayment plan, the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home. If you do decide to sell, enlist the services of an experienced Realtor. Do not try to sell the home by yourself. Time is of the essence and this is one time you want a professional in your corner.

Deed in Lieu of Foreclosure
This is when the lender allows you to give-back your property and forgives the debt. It does have a negative impact on your credit record, but not as much as a foreclosure. This option might not be possible if there are other liens against the home such as a second mortgage or back taxes.

For FHA Loans
Ask your lender if you are eligible to receive a one-time payment from the FHA Insurance fund. Your loan must be at least 4 months but no more than 12 months past due and you must show you are able to begin making full mortgage payments.

You must sign a promissory note which allows HUD to place a lien on your property for the amount received from the fund. The note is interest free, but must eventually be repaid. The note becomes due when you pay off the loan or when you sell the property.

For VA Loans
VA Regional Loan Centers offer financial counseling that's designed to help you avoid foreclosure. Call 1-800-827-1000 and ask for the phone number of the Loan Service Representative in your area.

Contact a HUD-Approved Counselor
A HUD counselor can help you determine which options might be available to you and negotiate with your lender to work out a repayment program. To find a counseling agency near you, call HUD's interactive voice response system at: (800) 569-4287.

Repairing Your Credit
If your home loan is past due, your other obligations such as credit cards probably are, too. A nonprofit credit counseling agency might be able to help you work with your creditors to reduce your monthly payments by lowering interest rates or extending repayment periods.

The key word here is nonprofit. Steer clear of companies that promise you quick, easy results for all of your credit problems--if you pay them a large fee.

Many desperate home owners have been lured into a foreclosure scam by bogus loan agencies who promise to make their financial problems go away and in many cases it is their home that goes away.

You also need professional help and the National Foundation for Credit Counseling is a good place to start. Their phone number is: 1-800-682-9832 or visit their Web site.

If you have more questions for FOX 4 Real Estate Expert Dave Pleskac, you can email him at dave@reeceandnichols.com or visit his Web site.


Article Source http://www.myfoxkc.com/myfox/pages/Business/Detail?contentId=2728087&version=2&locale=EN-US&layoutCode=TSTY&pageId=4.1.1