Having a home foreclosed means more than losing a house, for many families, it means losing their future, losing security and losing their place in the American Dream. Sadly, we are seeing more and more foreclosures everyday. But here’s a little secret…mortgage lenders don’t want your house; they would much rather be able to make a deal that will keep you in your piece of real estate. So take heart, because there are steps you can take to help prevent foreclosure.
More than 3,000 times daily, struggling homeowners call the foreclosure Help Hotline for advice on how to save their homes.
And so begins the complicated and time-consuming foreclosure prevention process. But that’s just the first step, because you can enlist the aid of mortgage servicers, which are the companies that manage the loans, and get a foreclosure prevention counselor to act as the go-between for you. Let’s face it most average people can’t even begin to understand the jargon contained in all the paperwork mortgage companies push their way. In fact, that’s how most people got into the mess they are currently in with their home loans.
The good news is that homeowners and mortgage lenders have a common objective, which is to correct the situation before catastrophe strikes. But beware, because the best solution for the mortgage lender isn’t always the best solution for the homeowner. As to whether or not you will be able to prevent foreclosure really boils down to the numbers. If keeping an at-risk borrower in their home is going to cost the lender more than a foreclosure will, that homeowner is usually out of luck. The good news is that foreclosures are expensive – at least $50,000 according to the Center for Responsible Lending. So here’s what you need to do.
Before any mortgage lender will consider helping you prevent foreclosure you must document your financial situation. Servicers request details about a borrower’s income, as well as what the family spends on food, clothing, car payments, credit card debt, and student loans, and you will have to submit copies of pay stubs, bank statements, and utility bills to back up your claims. If you had some type of life-altering event happen that caused you to get behind on your mortgage payments, you can also submit a letter that explains the situation.
Preventing a foreclosure doesn’t mean life will go on as usual, because in order to stay in your home, you will almost always have to cut back on other expenses. For example, your credit counselor may suggest you get rid of cell phones, cable television and eating out. This scaled back budget will help the team you’re working with come up with a dollar amount that is left over after all your reasonable expenses have been deducted from your income. That will also include some money for emergencies, which is usually around $200.
The mortgage company wants to see that you can pay all your expenses with a little left over. So if a homeowner has $3,000 in monthly income, $1,400 in household expenses and puts aside $200, which leaves $1,400 for a housing payment. It’s just a matter of simple math to figure out, but painful to put into place. But it is worth it to save your home. After the numbers have been figured out, the mortgage lender and your counselor will review the options you have for saving your home; options that will cost the mortgage lender as little as possible.
The solution most lenders like is a repayment plan, which allows them to make up missed payments; after all they are a business, so you wouldn’t expect them to take a total loss. Besides the repayment plans are better for homeowners as well because it helps them get back on track after emergency expenses like medical bills have put them in a financial mess. Think of it this way, this whole process will not only help keep your home out of foreclosure, it will also help curb excessive spending and put you on a reasonable budget, which can help ensure you don’t end up in a financial crises again.
Another option is to get a new loan, which actually involves restructuring your current loan. These mortgage modifications require sacrifices by investors, since some of the loan’s value has to be written down. Investors accept this if the alternative, foreclosure, would be even more costly. It’s all about the bottom line, and the bottom line here is that in order to prevent your home from being foreclosed, you must show the mortgage lenders that it will cost them more to foreclose on you than to make a deal.
One thing is for sure: If a borrower is fortunate to get an offer for a workout, the servicer isn’t going to negotiate beyond that. By that point, workouts have already gone up the line for approvals from the mitigation specialists to department managers and directors to sign off on. So, if you are in fear of foreclosure, call the foreclosure help hotline, get a counselor to help navigate you through the process and try to work with your mortgage lender.
If you are thinking of buying a home, selling a home, refinancing a home or understanding the current value of a home, please visit us at www.iappraiseforyou.com for more information.