What To Do When You're Facing Foreclosure

By Gina McKinley ABR, CRS

It's a situation that many people  are facing and the numbers are growing rapidly. Foreclosures aren't just happening to people who over-leveraged themselves and got into risky loans. They are happening to homeowners who are getting divorced, facing health issues, needing to relocate for a job, and numerous other reasons. Regardless of how you may end up falling behind on your mortgage, knowing what to do next is critically important.

There is a lot of information out there about foreclosures, but one thing that the news media tends to tout as being the first action step should actually be postponed, why?

A lot of the news media is talking about the first thing you need to do is contact your lender. However, if you facing foreclosure and  contact the lender first, the first person you interact with is the customer service agent who may threaten and tell you 'We're going to foreclose on your home right away' and scare you into not taking action. If you can get through to a loan mitigation person, it's possible to agree to a workout that is not affordable just to get the phone calls to stop. However, if you agree to a workout you cannot afford and miss a payment, you have essentially lied to the loan agency which is not a good thing. They will not consider another workout.

Homeowners generally fall into a panic mode shortly after they realize the severity of their foreclosure circumstances. What do you recommend they do first?

Do not panic.   ...look at your overall finances, income, expenses, and any liquid cash and then call the lender with that information so that they can workout something that's really going to help.

What can homeowners say to their lenders to help influence them to work out a mutually beneficial arrangement?

If you have gone through the steps of understanding what your deadlines are and then facing your finances and you still see that you're short, that's where you communicate with your lender and say "I need to work out some other agreement with you because right now I don't have it."

How receptive are lenders when homeowners say they can't pay their mortgage?

Lenders are willing to work with you. It will take a whole lot of persistence and diligence on your part. Do not be intimidated by the conversation your lender but step up and say "I am not going to be able to make this. What can we do to suspend the payment or lessen the payment or modify the payment until I get back on my feet?"  This process can take several months and you will need to submitt financial information.

Homeowners should also look for other sources of money. Where can they find this help?

There are grant programs through housing counselors like HUD; there are grant programs that are available to people who are going through foreclosure. You can reach out and be able to get some money that way.  The local library is a great way to start.  Your city may possilbly have a grant program. Housing Our Communities in Mesa is a non-profit counseling center and may also assist.

Homeowners to also think outside of the box to help come up with money; or reduce their budget. What are those creative strategies?

Taking in boarders and renting out rooms, renting out their entire house if relocating, and possibly staying with family so that you can make the mortgage payment.  Another thing is, with the gas prices being as high as they are and people having to commute back and forth to work, you may want to ask your employer if you can cut down to a telecommuting schedule and think about selling your car, car pooling, or oublic transportation.

There are plenty of other alternatives and people just need to look for them and apply them as quickly as possible.

Looking for solutions to an emotionally and financially draining situation such as a foreclosure is fatiguing and frustrating. However, if you realize there are options then you can begin to build momentum to rectify your situation. Ultimately, it's critical to consult with experts on this matter, to be open about your financial dilemma, and to seek help immediately. For instance, real estate agents can either help you sell your home in a short sale, if necessary, or rent it out to help you pay your mortgage. Trying to do it alone can be a painfully disastrous experience -- seek the help you need.