In the simplest of terms, a foreclosure is an action taken by a mortgage lender to take posession of a property when the homeowner has defaulted on the mortgage payments. The laws governing foreclosures vary from state to state, so if you find yourself falling behind on your mortgage, or foresee a problem with making your payments in the future, the faster you act, the better chance you have to save your home.
Foreclosures are reported on the homeowner's credit report for up to 7 years, so avoiding a foreclosure filing is undoubtedly in the homeowner's best interest, even if they don't want to keep the home. There are many options available for homeowners who don't want to keep the home, or simply can't afford to. Options such as short sales or deeds-in-lieu can help the homeowner get out from under the home without having the situation reported as a foreclosure on their credit report.
However, in our experience, most homeowners do want to keep their homes, but have had some kind of problem or circumstance that has made it difficult for them to keep up with their mortgage payments. In fact, there are a great many reasons why people find themselves threatened with foreclosure. Some of the most common reasons are:
When someone realizes that they are in danger of foreclosure, the earlier they act, the better chance they’ll have of avoiding it. If you’re behind on your payments, or even if you foresee a problem with making payments in the future, it’s vital that you communicate with your lender as soon as possible. This is very important, since it’s usually easier to make a payment arrangement than it is to reverse an active foreclosure. Plus, many lenders, as well as federal and state governments, have hardship provisions for homeowners in financial distress. In the end, it almost always costs the lender more to foreclose on your home than it would to make an arrangement with you and help you to avoid it.
You don’t have to be seriously delinquent on your mortgage payments to be considered “at risk” for foreclosure. If you’re having difficulty making your payments every month, even if you haven’t missed one yet, you can still consider yourself “at risk”. For example, if you’re living paycheck to paycheck and have very little discretionary income at the end of the month, you could be one extra expense or overtime cut away from missing a mortgage payment. Just barely scraping by every month could turn into a problem that’s much harder to get out of at missed payment number four than it would have been earlier on in the delinquency. Foreclosure is something that, while it should be prevented altogether, can be avoided even when you’re close to losing your home.
You’re not sure how you missed a payment, but you did, and now you’re not quite sure you can make up those payments before your home is in jeopardy. It may seem like there’s no help, but there is. You have several options when you’re facing foreclosure that could help prevent it, or at least guide you through it to avoid additional problems.
They may look like the enemy at this point, but honestly, your lender usually prefers NOT to foreclose on your home. In most cases, it will cost the lender more money to foreclose on your home then it would to help you develop a workout plan to keep it. It’s possible that, if you explain to your lender what your financial situation is, and express your desire to pay them back, they will be willing to work with you on a new payment plan instead of foreclosing. In fact, most companies have departments specifically established to help struggling homeowners. You may be eligible for a mortgage modification which could result in a reduction of your monthly payment, making it easier for you to maintain on-time payments. Click here for more information about mortgage modifications.
One of our certified housing counselors, specializing in foreclosure assistance, will work with you and your loan servicer to determine what options are available to you. Every situation is different and not every lender will offer the same relief options, so it's important to have someone on your side to help guide you through the process. A foreclosure counselor will review all of your financial information, including income, expenses, and the reason(s) you're facing foreclosure. Call one of our certified housing counselors at (800) 757-1788, or complete the form above to schedule an appointment. Remember, even if you're not in default now, but you foresee problems in the near future, talk to a counselor right away. Remember, there is ABSOLUTELY NO COST FOR THIS SERVICE!
There are companies out there that do their best to take advantage of your struggles and try to get you to pay them for their services without ever planning on following through with them. Keep in mind that HUD-approved housing counseling services are typically free, so be wary of any company contacting you that charges a fee. The Federal Trade Commission (FTC) outlines the most popular tactics: