East of the River

Series on the Keys to Homeownership: Foreclosure

What homebuyers and owners need to know

by: Frank Demarais

“Foreclosure” is a fearsome term containing the nightmare of losing your home, seriously damaging your credit, and making it very difficult to obtain new credit. It’s wise to learn about it and avoid it! The bottom line is this: “If you pay, you stay; if you don’t, you won’t.”

The most important advice I can give you is if you foresee payment difficulties, you must discuss the matter with your lender. The truth is that a responsible lender’s interest is the same as the owner’s: to stay in the house and to resume regular payments as soon as possible. This lender does not want your home; it wants your payments!

Also critically important is to avoid the “horror” of all remedies, the “foreclosure rescue” scams, the latest and hottest technique to steal homeowners’ equity. The “rescue specialists” want your home. They make big dishonest promises to take your home and then put you on the street or in the poor house or both! Sign no papers without expert, impartial advice.

The keys to avoiding foreclosure, if you are having difficulty making payments, are to contact your lender, get education about foreclosure, get professional counseling, and take timely action. Review your situation with a counselor at a HUD-approved non-profit housing counseling agency to consider your family budget and your options thru your lender and otherwise. Then immediately call your lender. The greatest danger is to let the situation slide until you receive a 30-day notice of a foreclosure sale after which options are greatly reduced.

What is foreclosure? It is the procedure spelled out in the Deed of Trust (mortgage), which owners sign at closing, tying their mortgage to their home. The deed of trust authorizes the lender in a case of owner default to sell the home to recover their loan principal, attorneys’ fees and sale expenses. “Default” usually means being 90 days late on mortgage payments, but it can also include failure of the owner to occupy or maintain the home.

Possible Remedies

* Try to arrange through the lender a forbearance, or a 30 day or so payment delayor a loan repayment plan, paying a portion monthly of the past due payments, or a loan modification, adding some months to the end of loan to pay the past due amount.

* Try to arrange through your lender or another lender a refinance if it lowers the payments and pays off some consumer debt.

* Try to restructure ownership among family and friends living with you to make possible a refinance to fully pay the old mortgage and share the new loan payments.

* Sell your property to maximize your proceeds and avoid major losses through foreclosure by an open market sale handled by a real estate agent, if one acts in time, or a discounted sale to family or friends..

* Bankruptcy is often mentioned as a way to delay foreclosure. We do not recommend it because it only delays payment, is costly, and seriously damages a person’s credit rating.

The key actions when foreclosure looms are contacting your lender, avoiding rescue scams, and obtaining good counseling.


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Series on the Keys to Homeownership: Foreclosure
What homebuyers and owners need to know
by: Frank Demarais
“Foreclosure” is a fearsome term containing the nightmare of losing your home, seriously damaging your credit, and making it very difficult to obtain new credit. It’s wise to learn about it and avoid it! The bottom line is this: “If you pay, you stay; if you don’t, you won’t.” The most important advice I can give you is if you foresee payment difficulties, you must discuss the matter with your lender. The truth is that a responsible lender’s interest is the same as the owner’s: to stay in the house and to resume regular payments as soon as possible. This lender does not want your home; it wants your payments! Also critically important is to avoid the “horror” of all remedies, the “foreclosure rescue” scams, the latest and hottest technique to steal homeowners’ equity. The “rescue specialists” want your home. They make big dishonest promises to take your home and then put you on the street or in the poor house or both! Sign no papers without expert, impartial advice. The keys to avoiding foreclosure, if you are having difficulty making payments, are to contact your lender, get education about foreclosure, get professional counseling, and take timely action. Review your situation with a counselor at a HUD-approved non-profit housing counseling agency to consider your family budget and your options thru your lender and otherwise. Then immediately call your lender. The greatest danger is to let the situation slide until you receive a 30-day notice of a foreclosure sale after which options are greatly reduced. What is foreclosure? It is the procedure spelled out in the Deed of Trust (mortgage), which owners sign at closing, tying their mortgage to their home. The deed of trust authorizes the lender in a case of owner default to sell the home to recover their loan principal, attorneys’ fees and sale expenses. “Default” usually means being 90 days late on mortgage payments, but it can also include failure of the owner to occupy or maintain the home. Possible Remedies * Try to arrange through the lender a forbearance, or a 30 day or so payment delayor a loan repayment plan, paying a portion monthly of the past due payments, or a loan modification, adding some months to the end of loan to pay the past due amount. * Try to arrange through your lender or another lender a refinance if it lowers the payments and pays off some consumer debt. * Try to restructure ownership among family and friends living with you to make possible a refinance to fully pay the old mortgage and share the new loan payments. * Sell your property to maximize your proceeds and avoid major losses through foreclosure by an open market sale handled by a real estate agent, if one acts in time, or a discounted sale to family or friends.. * Bankruptcy is often mentioned as a way to delay foreclosure. We do not recommend it because it only delays payment, is costly, and seriously damages a person’s credit rating. The key actions when foreclosure looms are contacting your lender, avoiding rescue scams, and obtaining good counseling.