Tips to Help Handle Potential Mortgage Foreclosures

In today's economic climate, there should be no reason why foreclosure is a first, second or even third option if you get behind in your mortgage payments, and you owe more than your house is worth because of the housing slump.      

I would suggest consulting a real estate professional for advice. But, there are a few things you can do on your own. Being an informed homeowner is the best defense against becoming a victim of a bank taking action against you. A foreclosure is a court action against the borrower. First, I would get the exact amount of how much you owe on your home. Next, ask the real estate professional for a quick market analysis of what your home might sell for on the open market. Even if you are not considering selling, this will help you know what your options are.

If you are currently behind on your payments, immediately ask the bank or mortgage company for paperwork to apply for a loan modification. Just the process of applying for a modification will buy you some time before the bank can take action. It can buy you more than six months in your home. Without this step, you can be in foreclosure with just one or two payments missed. Every lender has a loan modification department.

Consider if you should sell the home or if there is a way you can stay. If you qualify and are approved for a loan modification, your monthly payments might actually be modified to a lower, more affordable amount.

This is something that has been established to help cut down on the amount of foreclosures due to unemployment, or underemployment. If you are unemployed you might be able to postpone some money to the end of your loan; if you are underemployed, you may be able to reduce how much you pay each month until you get on your feet again. This is a great help. Consider the cost of renting when making this decision, as rents have gone up and homelessness is not an option.  Take great care in weighing all of these factors.

What if you decide that you need to sell the home? What do you do if your home is not worth what you owe? Well, that is where the real estate professional comes in.  A real estate agent can act as a go-between to negotiate how much the home is worth to the mortgage company so that it releases you from your loan even when you sell the home for less than you owe. 

Applying for the “short sale” is similar to applying for the loan modification, which you already applied for, but in this case the real estate agent has to convince the bank that the home is worth less on the open market. Once the bank sees your application and your need to sell, it sees what the house is really worth, often even though it take some time, a short sale is a good option to save yourself from foreclosure. Under a short sale situation, you may not owe anything once the home is sold. Under the foreclosure scenario, the bank may go after you for the difference of what they sold the house for and what you owe. They can attach future wages, take your future tax refunds and generally just ruin your credit for years to come.   A short sale can be a lot less painful once you determine that option is for you.    

Please feel free to share with me your stories. If I can, I am happy to give some advice, or maybe someone out there may have a situation that you are in and offer a possible solution.