FORECLOSURE IS AN AVOIDABLE OPTION

It's no secret that millions of homeowners across the country are facing the possible loss of their homes.  We read headlines every day decrying the woes of the housing industry.  Well, people, I have to say this:  this is not a housing crisis, it's a human crisis.  These are real people who are being displaced from their homes.  These are real families who face the prospect of losing the largest asset in their lives, along with their credit, and their self esteem.  The lending industry in large part created this mess, and now they are facing the financial burdens of this crisis.

If you are a homeowner in a financial predicament, you may believe that foreclosure is an inevitability.  It's not.  Foreclosure is an avoidable option.  Here's why.

Foreclosures are at an all time high.  Homeowners have walked away from their homes, and just let the banks take them back.  Now inventories of foreclosed homes are at an all-time high.  The truth is, your bank does not want your house.  They didn't buy it; you did.  They would rather you remain in the home and make timely payments.  They may ACT like they want to take your home back, but they really don't want to.  They are just protecting their assets when they start the foreclosure process. 

Remember when you purchased your home, and you had to sign all those documents?  You signed your name so many times your hands probably started to cramp. That huge set of documents was "the mortgage."  The mortgage is actually a security vehicle that pledges your newly purchased home as collateral against all the money the lender lent you to purchase said home.  In that lengthy document it spells out your obligations to meet the demands of the mortgage, and delineates the consequences if you fail to meet your obligations.  So when you stop making your payments, the lender eventually starts the foreclosure process, as outlined in the mortgage you signed at closing. 

With all that being said, and with the bank threatening to foreclose, the truth is this:  the lending industry cannot continue to afford the huge losses it is suffering as a result of all these foreclosures.  With estimates of each foreclosure costing the lender $30,000 to $50,000, it's easy to see why they can't afford to continue on this pace.  They will bankrupt themselves.  So motivated are these lenders now, that, along with the dunning notices, they are also sending you letters imploring you to maintain contact with them, and to work with them to help you stay in your home.  If you are facing possible foreclosure, people, by all means CONTACT YOUR LENDER!  They really do want to work with you.

Let's assume you do call your lender.  You're likely to get voicemail, and you need to navigate your way through that maze of extensions and mail boxes.  Most likely you'll get sent to Collections.  Their job is to collect as much of your arrearages as possible.  That doesn't always work for you.  Let's face it: if you had the $5000 you owe, you wouldn't be in arrears. So let me say this:  there are other options.  Let me say it again:  THERE ARE OTHER OPTIONS.  Your lender may not always tell you what all these options are, but I will. 

While your lender will always be willing to take a lump sum payment to catch you up, that's generally not very practical.  Your lender will also be able to offer a repayment plan, so that you make your monthly payment plus an agreed upon additional amount that will catch you up in several months.  Let's use this as an example:

Your monthly mortgage payment is $900, and you are three months behind.  That means that you owe them $2700 plus accrued interest and late charges.  Say all that adds up to $3000.  Your lender may work with you so you pay that $3000 over six months.  That means that you would pay your $900 per month mortgage payment PLUS $500 ($3000/6 mos.), for a monthly total of $1400.  After six months, you would have paid off that $3000 in arrears and remained current on your account.  But for many homeowners facing financial difficulties, you probably don't have the means to pay that much per month.  If you could afford $1400 per month, then you likely wouldn't have fallen behind when you were only paying $900, right?  So what else can you do to get caught up?

Your lender will require you to complete a financial disclosure statement that itemizes your income and all your monthly expenses.  They will ask you for a "hardship letter" that details why you are unable to stay current on your mortgage. Your lender will have to determine through your letter and your financial statement if the hardship is temporary and correctable, or if it is chronic and irreparable.  IF YOUR HARDSHIP IS TEMPORARY, and you demonstrate a willingness and ability to make payments, your lender will bend over backwards to work with you.  Assuming that your income is greater than your expenses, then you can negotiate with your lender.  If you have made a strong effort to maintain good standing with your lender, your creditworthiness will aid you. 

If your situation is temporary, and you now have or will soon have the ability to repay, then here are some additional options for you:

Negotiate for a longer repayment plan.  If you can't afford to repay the arrearages in 6 months, then ask for 12 months.  Ask for 24 months.  They may say no but they also may say yes.  It doesn't hurt to ask!

Ask for a special forbearance.  This does not forgive the debt but allows you to postpone some of the debt.  If you are three months behind your payments, for example, and you have the means to start paying on your mortgage again, negotiate for the arrearages to be postponed to the end of the mortgage.  That way you can start making your normal monthly payments without having to pay any additional amounts to get caught up.  It merely extends the length of the mortgage.

If you are in an adjustable rate mortgage, and your rate is has gone up, you can negotiate to get placed into a fixed rate mortgage at more affordable rates.  You can negotiate the terms of your mortgage, so your monthly payment may reduce and then gradually increase as your finances get better. 

These are all options that may be available to you.  It won't be easy.  It'll be frustrating as hell.  It won't be quick.  The process takes time, and will strain your patience. Find the strength to deal with it. I cannot guarantee that you will succeed in your negotiations, but I can guarantee you will absolutely fail if you do nothing at all.  The earlier you make contact and attempt to work things out, the more likely you will be to successfully negotiate to remain in your home. 

Sometimes, though, as hard as you try, you may not be able to remain in your home.  Debilitating illnesses, divorce, loss of a spouse through death, divorce, unemployment....these are all huge factors that just may make it financially unfeasible for you to remain in your home.  That does NOT mean that you need to go to foreclosure!  Believe it or not, you still have options.  In my next blog, I'll be discussing what those options are.  Until then, if you have any questions, why not contact me?  I can be reached at my office at 231-946-4404, or by email at chuck@chuckgollay.com.