With the government pouring billions of dollars into banks in order
to buy equity and backing new bank debt, the stock market consistently
tanking, unemployment rates soaring, long-standing lending institutions
crumbling, it is a scary state of financial affairs for Americans.
One of the many financial crises affecting our economy is the
crashing housing market. Before the real estate bubble popped, the
economy was healthy and Americans were flocking to buy homes, often in
areas where home prices were inflated. Real estate appraisers were
over-appraising homes. Real estate agents and mortgage brokers praised
creative financing options such as adjustable-rate mortgages (ARM).
Banks were approving loans for buyers whose credit was questionable and
buyers were offered subprime loans. “No money down” and “100% financing”
were chanted from advertisements. However, as many ARMs were coming out
of the introductory period and the balloon payments began, home buyers
were shocked and not ready for these higher payments, which now included
the principal balance.
ARMs, subprime loans, and the downturn in the economy all led to the
foreclosure crisis. If your payments on your mortgage have become
increasingly less frequent, you’re not alone. According to the Mortgage
Bankers Association (MBAA), 6 in 10 homeowners are already delinquent on
their mortgages. 250,000 new families will go into foreclosure every
three months. 1 out of every 200 homes will experience a foreclosure.
The thought of going into foreclosure is terrifying, but it can be
avoided. Foreclosures affect your credit negatively and will definitely
make it almost impossible to purchase another home soon. Here are steps
you can take so you don’t have to watch your house go into foreclosure.
When you’re running behind on your mortgage payments, don’t let pride
stand in your way for getting some relief. Stop letting those phone
calls go to your voicemail. Stop throwing letters into the garbage. Call
your mortgage lender immediately and tell them you are having problems
paying your mortgage payment and ask them for a solution. Banks don’t
like the idea of foreclosures any more than you do. They lose a lot of
money that cannot be made back. By negotiating with your lender, you
give yourself more options in paying back your mortgage and take one
step further away from foreclosure.
Lenders may provide you with several options to help keep you in your
home. A loan modification reduces your monthly mortgage payment to an
amount you can afford. However, the amount you’re not paying now will
get tacked on to the end of your loan. This can extend the length of
your loan significantly. You may be able to file a forbearance which can
allow you to reduce your payment or temporarily suspend payment for a
given amount of time. Your lender may allow a reinstatement where you
agree to pay off the past due amount by a specified date.
Start looking at your budget and finding ways to put less money into
clothing or coffee and more money into your mortgage payment. Instead of
driving your car everyday and paying a ridiculous amount of money for
gas, look for ways to carpool with your co-workers. Start enjoying
public transportation. I took the bus for more than a year when I was
living in Los Angeles. I didn’t have to think about being too tired to
drive or sitting in a traffic with nothing to do. I read plenty of books
and met a lot of interesting people. Do you really need all the bells
and whistles of your cell phone? Maybe it’s time to switch to a
Monthly bills like the cell phone and gym
memberships can wreak havoc on your budget. These changes don’t have to
be permanent, but they need to happen or you can easily run the risk of
ruining your credit and losing your home. This is not a time to be
flaunting your pride and doing things out of convenience.
Foreclosure is a serious situation and you need to make any adjustment to your
lifestyle in order to make those monthly mortgage payments.
When you examine your budget, your mortgage payments should be at the
top of your priority list. If you need to be late on a few credit
cards, then do so. The added credit card fines and delinquencies will
impact you far less than losing your home.
You may be forced into selling your home or giving it back to the
bank. If you owe more on your home than it is actually worth, a short
sale may be an option for you. Based on what your mortgage lender agrees
to, your home will sell at a discounted price. Your lender may conclude
that your debt is settled. A deed in lieu of foreclosure is another
option that your lender may agree to, but only after you have tried to
put your home on the market. A deed in lieu basically allows you to sign
your home over to the lender so they can sell your home and your loan
is considered canceled. There are ramifications for either of these
options, so make sure you educate yourself and seek out counseling
Unfortunately, there is a growing trend of scam artists who are
willing to take you for everything in this current foreclosure crisis.
Some companies will offer to talk to your lender for a fee which can
often be five times the amount of your monthly mortgage payment or more.
Of course, the problem never gets resolved, because these scam artists
never call your lender. They’ve only taken away your hard-earned money
and left you with nothing but an even bigger headache. Some scammers say
that for a fee they can renegotiate your mortgage payments for you but
require you to sign documents, and before you know it you’ve signed away
your home to a stranger.
Foreclosures bring a higher rate of depression, desperation, and a
feeling that nothing will ever get better.
Don’t fall for scams and
become confused by their sunny rhetoric. If you’re not dealing with your
lender directly, be prepared for the fallout that may occur. Never sign
anything with regards to your home and the deed until you have a lawyer
examine the documents. It’s easy to accept anyone’s help, but make sure
you’re getting the right kind of help. Accepting that you have a
financial problem and willing to work with your lender can be the
difference between a warm place to sleep at night or racing out of town
with nowhere to go.
Some great sources for more information can be found at NeighborWorks America and at the Federal Trade Commission.
You can also visit Hope Now for assistance and counseling with regards to foreclosures.