Making Partial Loan Payments to Stop Foreclosure

By: Dave Dinkel

Making partial loan payments while in foreclosure is what many homeowners ask us about, usually because one or both spouses became unemployed. Before they are employed again, they can still make partial payments because they frequently have one income source. Typically, as soon as they are working again, they can handle the old loan payment and even have some left over to make a small additional payment.

These homeowners call their lender and explain the problem and are met with no sympathy and a resounding "no" for an answer. The lender's rep will go on to explain that it is the bank's policy that they are not allowed to accept partial payments. Sometimes they even say it is "law" that they can't help. Frankly, the rep is telling the homeowner the truth depending on whether the lender is the actual lender or just a processing company. So the general answer is always going to be "no".

So what is a homeowner to do to not lose his home to foreclosure? In the recent past, lenders would not compromise and help the homeowner. In today's mortgage and real estate markets, they have become somewhat flexible. The first option is to request a loan modification. The mortgage would be "modified" in one of two ways, either by extending the payments and adding the past due amount on the end, or by increasing the monthly payments by a very small amount each month until the end of the loan. Either of these methods would allow the homeowner to get out of the missed payments and keep his credit score from free-falling.

If the lender is uncooperative, another option is to have friends or family members loan you the difference until you can get back on your feet. These people will be your toughest critics and usually will tell you what you shouldn't have done wrong, etc. However, bite your tongue and offer them a second mortgage so they know they will get their money back.

Even using credit card advances could work if you take the time to make certain that your future cash flow will cover your living expenses and your new credit card payments. Using credit card funds to pay your mortgage is a desperation measure, and before you do it, make certain you will have enough income to make it work, otherwise you could be looking at a "second mortgage" on a credit card that has a 33% interest rate if you pay late. Work on an "exit strategy" to get the cards paid off first and always on time. Simply put, "Where is the money coming from?"

In summary, the first step to take in resolving the potential foreclosure is to do some basic financial planning and determine if you can really afford your "American Dream" before it becomes your greatest nightmare. Next take affirmative action to either get out of your home by selling it, renting it or just leaving it behind. If this isn't what you want, move quickly to resolve your past due mortgage payments.

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