03 February 2009

Help is Available to Prevent Foreclosure!

Help is Available to Prevent Foreclosure

President's Message

Chris Sloan

                 If you're having trouble paying your mortgage, you're not alone. Risky loans, home price corrections and a struggling economy have made it harder for families all across the country to keep up on their mortgage payments. In 2008, more than 3 million U.S. homeowners received some sort of foreclosure filing on their home, according to RealtyTrac data.

                As a result of the increased foreclosures, the National Association of Realtors has created a consumer education brochure, "Are You Having Problems Paying Your Mortgage? Learn How to Avoid Foreclosure and Keep Your Home," that provides homeowners with information about how they can possibly save their homes from foreclosure. In this column, I will highlight the information contained in that brochure.

                One set of loans that has a particularly high foreclosure risk is subprime mortgages. Because subprime loans were often purchased by those with weak or blemished credit, they had higher interest rates and higher costs. One product that was particularly popular is called a hybrid adjustable-rate mortgage. This type of loan starts out with a low, teaser rate that lasts for a couple years. This lower rate is then followed by significant payment increases over the life of the loan.

This interest rate increase is often referred to as "payment shock" because the borrower is surprised by the size of the larger payments. When homeowners are unable to refinance these types of loans, foreclosure often results because the borrower cannot afford to continuously make the higher payments.

                If you find yourself in a similar situation where you cannot afford to make your mortgage payments, don't avoid the problem. The sooner you act, the more likely you'll be able to save your home from foreclosure. And help is not limited to those with subprime loans; people who have lost their jobs or face other financial difficulties should also seek out help. The NAR brochure suggests the following options:

                First, the best and least expensive way to save your loan will be to work directly with your lender or the loan servicer who collects the payments. Your lender may allow you to make a partial payment or skip payments if you have a reasonable plan to catch up. Or you may be able to arrange a repayment plan where you pay an additional amount each month until you are caught up. Your lender may also agree to amend your loan terms to help you avoid foreclosure (e.g. switching from an adjustable-rate mortgage to a fixed-rate mortgage or giving you more years to pay off the loan).              

Second, if your current lender is unable or unwilling to help, you may be able to refinance your loan with another lender. If you are able to refinance, remember that you should shop carefully for a loan. Getting a loan with a low interest rate and low fees can save you thousands of dollars in the long run.

Third, try contacting a counseling agency. The Homeownership Preservation Foundation provides a nationwide assistance number, (888) 995-HOPE, that allows you to speak with a foreclosure counselor day or night. More information about the hot line is available at www.995hope.org. Reputable counseling agencies can also be found on the U.S. Department of Housing and Urban Development's Web site, www.hud.gov/counseling.

                Fourth, consider selling the home. It is better to sell than to have a foreclosure on your credit report that could prevent you from buying another home in the future. If you are having trouble selling your home because you owe more on your mortgage than the property is worth, a short sale may be the solution. In this situation, a bank will allow you to sell the home for less than the mortgage amount by forgiving a portion of your debt. These transactions can be very complex, so make sure to work with a Realtor who has experience working with short sales.

                Finally, be wary of any advertisements like "We Buy Houses for Cash" or any other claim that sounds too good to be true. Foreclosure rescue companies will pocket fees from homeowners and the foreclosure often takes place anyway.

Remember, you are more likely to get help if you seek out assistance early. For more foreclosure prevention tips as well as a copy of The National Association of Realtors brochure, visit www.Realtor.org/subprime.

Help is available to prevent foreclosure !!!

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