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Thursday, May 31, 2007

Avoiding Foreclosure

If you can’t make your next mortgage payment, or if you are already behind, you need immediate help. The Homeownership Preservation Foundation has joined forces with mortgage lenders, nonprofit organizations and city government agencies to provide homeowners with assistance and resources to help you get back on track.

Visit the Hope for Homeowners website, or call the homeownership hotline at 1-888-995-HOPE for immediate assistance.

Here are a few tips from NeighborWorks for avoiding foreclosure:

* Take advantage of pre-purchase counseling or financial education offered by nonprofit organizations

* Free pre-purchase counseling is offered through local governments as well as nonprofit organizations.

* Avoid prepayment penalties and balloon payments.
People who refinance their mortgages with loans containing prepayment penalties or balloon payments are more likely to undergo foreclosure, according to a study by researchers at the University of North Carolina. According to the study, a prepayment penalty increases foreclosure risk by about 20 percent. Mortgages with balloon payments were 46 percent more likely to go to foreclosure than loans without. Protect the equity in your home – it’s a valuable source of wealth that will build over time.

* Stay on top of home repairs and maintenance. NeighborWorks organizations provide counseling in home maintenance and repairs and rehabs that improve the value of a home. Too often emergency repairs and less-than-trustworthy contractors push a homeowner into foreclosure.

What should you do if you miss a payment?
More than half of those in foreclosure did not call for help when they fell behind in their mortgage payments. Calling for help is the most important factor in preventing foreclosures.

Notify the bank as soon as you know your payment will be late. Calling when you are 30 or 60 days late is better than calling when you are 120 days late Remember that foreclosure is not in the best interest of lenders – lenders report that it costs up to $50,000 or almost half the loan balance each time they write off a foreclosure.
Work it out. Depending on the situation, the lender may lower the interest rate, lower the borrower’s monthly payment, or enter into a repayment agreement for missed payments.

What are your options if you cannot make payments?

Forbearance
– You are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.

Reinstatement – When you are behind in your payments but can promise a lump sum to bring payments current by a specific date.

A Repayment Plan – If your account is past due, but you can now make payments, the lender may agree to let you catch up by adding a portion of the past due amount to each current monthly payment until your account is current.

Modifying Your Mortgage – The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce your payments). One solution is to add the past due amount into your existing loan, financing it over a long term.

Selling Your Home – If catching up on payments is not possible, the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home.

Property Give-Back – The lender can allow you to give-back your property-- and then forgive the debt. Give-backs do, however, have a negative impact on your credit record, although not as much as a foreclosure. The lender might require that you attempt to sell the house for a specific time period before agreeing to this option, and it might not be possible if there are other liens against the home.

Again, if you do fall behind on your mortgage payment, don't waste another minute, call your lender before it's too late.

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