Acting to Stop Foreclosures

By: philip smith

Among the new initiatives to help stop foreclosures is the Federal Housing Authority's refinancing product aimed at assisting thousands of families struggling to cope with the higher mortgage payments of resetting ARM's. To qualify, families must meet certain conditions which include a good credit record, or more specifically that before the ARM reset all monthly payments were being met on time. This underscores the importance always of acting quickly to address temporary setbacks, of preserving a good credit score, and understanding that to avoid foreclosure and so avoid damage to your credit record, is preferable to walking away from your home. The secret to making the most out of any initiative or willingness of lenders to stem the dramatic increase in foreclosures is acting immediately, when you first are aware that you are going to miss a monthly instalment.

First pursue the options available from your principal lender. You can present a formal plan to repay any defaulted amount and accruing fees over a period of time, while still meeting your current monthly instalments. Or you may ask the lender to agree to Forbearance, where he reduces or suspends payments over a short period of time allowing you to recover from a temporary financial crisis. A Loan Modification could address a longer term financial distress; with reduced payments, or addition of missed payments to the back end of the mortgage. Persuading the lender to agree to a (voluntary) Deed-in-Lieu is more difficult and unlikely to succeed if other liens are registered against your home.

Be sure to request details of the lender's workout package before you present your plan. These will include a hardship letter, in which you must clearly and briefly set out the reason for your default and your preferred solution or workout proposal. You must be the 'owner' of this letter; no third party will succeed in explaining your difficulties better than you. All the papers required need to be submitted together, and be sure to keep your own copy of everything you present, there will be several departments of the bank or mortgage company involved, and nothing will happen overnight. There may be a policy that no workout plan will be considered until payments are in arrears a certain length of time. Yet another reason for you to consider another option; to sell your home.

Get on the Internet and Google up information about the foreclosure laws in your State. Then you will have an idea of how much time you have to sell your home once a delinquency notice is issued. Some Deed of Trust states have a very swift timeframe from notice of default to trustee sale, 60 days or less. This is important to know when assessing your chances if you decide to attempt a pre foreclosure sale and settle as much of the outstanding debt as possible. The lender will have final say on any 'short sale' buyer proposition, where downward pressure on house prices in your area has resulted in the loss of all of your equity and more. Your credit record intact will help you get back up on your financial feet and back into the home buyer's loan market a little wiser than before.

Foreclosures
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