Saving Your Home From Foreclosure - Part 1

(Disclaimer: First, please keep in mind that I am NOT a personal finance expert and the information that follows is based on information readily available elsewhere on the internet.)


Number 1: Do your homework

Gather together all of your mortgage loan documentation. When did you last pay the bill? Where did you send it? What date did the check clear your bank? How much did you pay? Have you called them recently? Did you take notes on the call? If so, who did you speak to? Did you make any promises? Gather together all of your loan information so that you will have it handy... don't forget to make sure you have the account number. And if you have a second mortgage, make sure you have that information, too.

Research a few websites to learn the terminology and what options may be available to you from special assistance programs. Here are a few websites that I recommend:

http://makinghomeaffordable.gov/- This is the new government run resource for home owners.
Visit your mortgage lender's website (it should be listed on the last bill you received) they may have a special assistance program

Read the post ... and the notes... on Clark Howard's website about the loan modification program

Be very wary of the scam artists out there who promise to help you with your mortgage. You should NEVER have to pay anything to get help. Except maybe an application fee directly to YOUR mortgage company for a loan modification.

A national list of foreclosure assistance programs can be found on the National Association of Realtors website http://www.realtor.org/home_buyers_and_sellers/foreclosure_assistance_programs_by_state
The U.S. Department of Housing & Urban Development - http://www.hud.gov/foreclosure/

Get to know the terminology with online mortgage glossaries like this one.


Number 2: Pick up the phone and call your lender.


Remember, everything you tell them can potentially be used to help them collect. So don't offer your life story to the first person who answers. That person is a customer service representative in the collections department. There's not a lot they can do for you. You want to speak to their supervisor or someone in "Loss Mitigation." Loss Mitigation is a department that most mortgage lenders have where the loan specialists are well versed in all of the programs and options the lender has available to work with you in bringing your loan current.

Typically, options your mortgage lender may have available include:
(see glossary for definitions)

1. Special Forebearance Plan - this is typically for a temporary financial set back


2. Repayment Plan - you agree to pay the past due amount spread out over a set period of time


3. Partial Claim - if you have an FHA loan, HUD may be able to help bring your account current


4. Loan Modification - if the investors backing your loan will allow it, the mortgage lender can modify the terms of your loan to keep you out of foreclosure

Take your time when you speak to the loan specialist so that they can type all of your information correctly into their database system. These "notes" that they're taking will be important as this process moves forward because the lender will refer to them in making decisions and whenever you call with questions. Think about what you're saying so that your story is consistent each and every time you call. I'm not saying you're not telling the truth but the lender is hearing a sob story from everyone these days. Make sure that your reason(s) for falling behind on your loan don't change from week to week.

The loan specialist in loss mitigation is going to ask you lots of questions about your current financial status. You will need to be prepared and have access to a fax machine. You may need to provide

• your income tax returns for one or two years
• copies of pay stubs (payroll)
• a list of all of your monthly expenses

All of this will help them to determine which of their options may best fit your situation so that you can avoid foreclosure.

Number 3: If all else fails, you may have to sell your home

Selling your home in a good market used to take about 90 days. Today the market reflects a trend of 6 - 12 months... But what if you can't afford your home anymore? What options do you have available to you to avoid foreclosure? One option is a short-sale.

Unfortunately, steps # 1 and # 2 may work to prove that you really can't afford your home anymore. In part 2 of this post, we will explore "short sales." A short sale is basically when you work with a realtor to sell your home for what you owe on the mortgage. The bank has to approve the sale. It's up to the bank whether or not they will allow you to sell your home for less than what is owed on the mortgage. This still will negatively impact your credit but not nearly as bad as a foreclosure.

I hope to have part 2 of "Saving Your Home From Foreclosure" published in the next few days. In the meantime, if you have questions, please feel free to email me or leave a comment.