Recently someone reached my blog via a term related to foreclosure. I don’t really have anything about that specific topic, so I thought I should add something. If you’re facing foreclosure, the most important thing to know is that you do have options. I don’t think people should just walk away from their mortgages – I’m a firm believer in personal responsibility and honoring contracts. Nevertheless, all the news about the mortgage meltdown has made some people decide that walking away is the only solution. Here are the other options:
Mortgage Refinance
I know not everyone is able to refinance, especially if their homes are underwater (the value is lower than the loan balance), but it should be everyone’s first attempt to resolve the situation. Although I’m opposed to the new mortgage bailout programs being proposed, you should look into it if they become law.
Forbearance
If you’re behind on a couple of payments, but can catch up, contact the lender for a forbearance. They’ll typically add the payments to the end of the mortgage. You may more in the end, but it’s better than losing your home and having to start over.
Loan Restructuring and Other Options
Some people have reported that their lenders don’t want to talk to them about restructuring or modifying their loans. If you can’t refinance and a forbearance isn’t enough, you may want to contact a reputable company to review your foreclosure options and negotiate with your lender. Lenders that won’t bargain with homeowners may be more willing to bargain with a professional whose emotions aren’t involved and who knows what to ask for.
Finding a Reputable Foreclosure Service
Once your notice of default is published, you’ll start getting phone calls, letters, and even knocks on the door from people offering to “rescue” you. Sometimes these are scams. Instead, you should be proactive and search for a foreclosure company on your own. I would start with a simple web search for “foreclosure services” or “foreclosure help.” Then I would investigate them with the Better Business Bureau and HUD. If you have an FHA mortgage, contact them to discuss your options.
Scams to Watch Out For
A scammer’s main goal is to steal whatever equity may be left in your home, or to find some way to profit from your loss. When dealing with a foreclosure service, look-out for the following things:
Signing over your deed. Never sign your deed over to anyone. Often the scammer will offer to pay off the property if you sign over the deed temporarily. In some cases, they suggest a lease-buyback scheme, but the amount you’d need to pay to buy it back is more than the original loan. In another situation, they collect your rent checks without paying off your mortgage, leaving you with both expenses. In a third situation, they’ll sell your house out from under you and take whatever equity existed.
Excessive fees. Some services charge very high fees for even the simplest of paperwork. If it’s something you could do on your own, don’t pay someone else to do it.
Pressure to sign now. Although you may have to act quickly, you should have at least a couple of days to think over the offered solution. If you’re told that the offer will be withdrawn if you don’t sign now, just walk away.
Repeated refinancing. Each scam refinance includes padded fees for everyone in on the scam, leaving you with a bloated mortgage balance and nothing left to pay it with.
Despite the scammers, you can still find reputable help. You can also go it alone. With mortgage defaults on the rise, more lenders and government agencies are willing to help you keep your home.
