Foreclosure - this single word can
strike fear into the heart of any person regardless of their status in life.
Society tends to think that if a person is facing foreclosure, they are
deadbeats who lack motivation and refuse to pay bills on time. However, the
reality is that many homeowners who are facing foreclosure are hard-working
people who have fallen on hard times during a financial crisis.
While the primary cause of foreclosure
is failure to pay a mortgage or tax bill on a home, the underlying causes are
far more complicated. Those who have been laid off from good paying jobs,
people who have gone through a costly divorce or those who have had medical
issues that have weighed down their financial abilities all may be facing
foreclosure. Combine this with the less than scrupulous mortgage lenders and
brokers who preyed on unsuspecting homeowners and told them they could help
them get out from under homes they could not afford, and you have a recipe for
disaster.
Regardless of the reasons that a person
is facing foreclosure, what is more important is to understand what to do once
the foreclosure notice has arrived in the mail. Although the initial reaction
may be to ignore it, this is not only lacking in sense, but it will not make
the problem go away. Here are some things that a homeowner can do when
they receive a foreclosure notice.
Evaluate current financial position
The first thing that a homeowner should
do when they receive a foreclosure notice is to sit down and honestly evaluate
their current financial status. Before taking any additional steps, a
homeowner must be certain they can continue to pay their mortgage, taxes,
insurance and continue to maintain the home. Once a homeowner determines
they can resolve their finances to maintain the home then they can proceed to
the next step.
Contact the lender
It is important that a homeowner contact
their lending institution when they are facing foreclosure. This is especially
helpful if there has been a financial crisis that has been resolved. Many
lenders may be willing to work with a homeowner to bring their mortgage current
without needing to pay all of the arrears at one time. Past due amounts may be
divided up over a twenty-four-month period (or longer) depending on the lender
and added to the current mortgage payment.
Most lenders have a loss mitigation
department. Remember, lenders are not in the business of property ownership.
Many feel it is in their best interest to work something out with the current
homeowner to continue paying their mortgage.
Homeowners who cannot afford their
mortgage
For a homeowner who has determined it is
not financially feasible for them to continue living in the home, the lender
should still be contacted. The homeowner should review their loan documents and
see if there is a "deed in lieu of foreclosure" clause in their mortgage.
If there is such a clause, the homeowner should negotiate with the lender
regarding any potential deficiency
judgment (provided the state allows such a judgment).
While the end result will be the same
(e.g., the homeowner gives up their home and their credit is negatively
impacted), the drawn out process of foreclosure does not have to be a burden to
the homeowner or to the lender.
When lenders refuse to negotiate
While it may be less common, sometimes a
lender refused to negotiate. A homeowner may contact FNMA and
ask about the programs that are available to help them save their home from
foreclosure. Never accept any offer from a person contacting you about saving
your home from foreclosure that involves paying a fee. The programs that are
legitimate are free to all homeowners and this help should not require payment
of any fees.
While it may be tempting to ignore a
foreclosure notice, it is very short-sighted. Deciding if there is stable
income that will allow a homeowner to keep their home is the first step in
deciding what steps to take. Negotiate with the lender, work with the
approved government programs and if all else fails, a homeowner may consider
filing bankruptcy to stop the foreclosure process. None of these methods will
be effective if the homeowner does not have a stable income.
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