STEPS TO AVOID FORECLOSURE
August 19, 2007 - At this time in what I call "the new mortgage economy", we are in a "post bubble" real estate economy, where countless people are struggling to make their mortgage payments on time. This often leads to mortgage delinquency, then a credit challenge, then the inability to obtain a refinance to take the equity out of ones home. If this is not immediately corrected, it can lead to a pre-foreclosure, and subsequently foreclosure where the bank re-acquires your property. This is not the situation anyone envisions themselves in when they bought their home, but it happens to the best of us.
So what is one to do if they find themselves in this situation?
First, is to COMMUNICATE with your mortgage company. They know you are having trouble paying, but if you avoid their calls, letters, and other attempts to contact you, they will assume the worst and that you are just avoiding them and in this case, they will just do whatever they can to protect their investment, including foreclosure on your home and removing you from it.
Second, look at why you are in this situation. Many times there are legitimate reasons for this such as a business failure, unexpected medical expense, loss of work, divorce, death, or other tragedy. It stinks to have to give everyone your personal information, but in a sense, you are living in their home without paying for it, so they deserve some explanation. My advice is to just be real with them and let them know what has happened. If your situation is changeable such as getting a new job, then you may be back on your feet sooner than you think. Know this - it is not the end of the world, even if you lose your home. You can always start over.
Third, look at financial alternatives with your lender. The bank will usually offer you some financial counseling in an attempt to restructure your loan. They will need to know all of your income and expenses to see if you qualify for this. Again, be very up front with them because if they find you are hiding information from them, they will be far less likely to help you recover. A lender does not want your home, they just want you to pay your mortgage. In fact, foreclosures cost them more money as they are not in the property sale business, but rather the lending business.
Fourth, look at other sources of revenue. Look to family or friends that may be able to help you out with a short term loan. Consider getting a second job to bring in the additional money needed to recover from your financial setback. Perhaps you have retirement funds or 401k funds, but be cautious of "throwing good money after bad", meaning that you have to KNOW (not just wishfully hope) that once you get caught up with the mortgage you will be able to pay all of your bills including the mortgage. The worst thing you could do is to borrow money or liquidate your retirement and then still lose it and your home because you were unrealistic.
Fifth, seek professional help. Contact your local real estate agent to find out what your home is worth and whether or not it would make sense to sell it. Keep in mind you need to have a place to live, but perhaps a rental may be less than your mortgage. Next contact your local consumer credit counseling organization to see what advice they can offer. Lastly, you may want to see advice from a competent and ethical bankruptcy attorney as this may help you save your home by liquidating your other debts.
Lastly, if you are in a position where you just want out, there are always investors willing to help you out of your situation by buying your home quickly. Beware that an unscrupulous investor does not capitalize on your misfortune however and hold your ground. If you need a referral to a professional investor, please use our contact form and specify this in the comment box.
There are two way to sell your home to an investor. The first is if you have enough equity in your home (equity = market value divided by the total number of mortgages on the property), almost any investor will buy the home from you at a discount. I strongly recommend trying to sell the home using a real estate agent first, as this will net you the most money usually. If you need a referral to an agent in your area, please send us an email to info @ atozlender.com and specify that you need an agent.
Next, if you are like a growing number of people and you owe more than waht your home is worth, you may need to do a short sale. This is where the bank will agree to let you sell your home for less than what you owe on it. Usually they will reqiure you to prove to them that you have a true financial need or dillemma (which isnt hard) and you may get hit with a tax liability for the difference in what they sell it for, and what you owe. The bad news is that once you are in a place where you can't pay the mortgage and you owe more than the home is worth, this is often your only other option next to a foreclosure which you don't want to show up on your credit report.
Our founder is a member of the American Foreclosure Specialists Realtor Network and we also have a nationwide network of real estate investors. If you live in a very small town, we may not have a resource for you, but we will do our best to assist you in any way possible during this challengine time.
Please fill out the form below and we will have someone contact you as soon as possible.
I hope you found this useful. Please feel free to drop me a line to give feedback or ask questions at anthony @ atozlender.com.
And now a word from our lawyer: This information is subject to change and neither Anthony Kirlew nor Consumers Advantage Mortgage will accept any claims or liabilities that arise as a result of the use of this information.