STOP FORECLOSURE? YES YOU CAN!

Although there has definitely been some improvement in the economy, foreclosure is still a very real situation for many Americans. Depending on where you live foreclosures may have increased not decreased. If you are facing the loss of your home, arm yourself with information and understand the available options.

NOW IS THE TIME TO TAKE ACTION - DON'T PROCRASTINATE

HAVE YOU EXPLORED ALL THE OPTIONS TO AVOID FORECLOSURE??

As jobs continue to disappear, more homeowners face foreclosure. The thought of losing your home, your dream, can be overwhelming. Unfortunately, too many borrowers sink into depression and fear, throw up their hands in defeat, and neglect to take any action. There are steps that can be taken to stop foreclosure.

One key to success in this endeavor is early action and persistence on your part. You must contact the lender as soon as possible to make your financial problem known. This is not the time to procrastinate because a delay can most certainly result in failure. Your home is not only one of the biggest financial investments you'll ever make, it also represents your dream and holds priceless memories.

This is the time to take action to stop foreclosure. You will need to do some research and explore the options available to you. Foreclosure laws and requirements differ from state to state. Your research should start with understanding the laws and requirements for your state. In some states, the process moves quickly. Again, you can sabotage your effort to stop foreclosure by your own inaction. It is time to act! It is time to arm yourself with information and prepare for battle with the lender.

YOU CAN DO YOUR OWN MORTGAGE MODIFICATION

LOAN MODIFICATION TO STOP FORECLOSURE

Under President Obama's plan to keep responsible borrowers out of foreclosure and in their homes, the mortgage modification plan is an excellent option. Contact the lender to find out if you meet the criteria. As you take the first step, begin a log and take notes during this phone call and every subsequent call. Your log should include date, time and name of the lender's associate as well as your comments. Stay organized! Before you make the call, be sure you have the right attitude. Remember, you are not in control of the situation. You need to remain calm, pleasant, polite and firm.

The lender will require details about your current financial situation. To prepare for these questions, you will need to do a thorough financial inventory. What is your income? What are your expenses? How much money remains after paying these expenses? The bank will need a complete list of assets and liabilities. This information should be complete and accurate. Yes, this inventory process is a chore, but it is crucial to your successful mortgage modification.

One of the lender's first questions will be: "Why do you need a mortgage modification?" To support your need for the modification, the lender will require a hardship letter from you. This letter will explain what happened to create your current financial dilemma and when the situation first occurred. For example, a job loss, decrease in salary, or major medical problem that prevented employment. As you compose this letter, be concise. The letter should include your name, address, lender's name and the loan number. When the letter has been completed, spell check it and read it aloud. Yes, this involves some time and energy but remember the goal: stop foreclosure of your home. After you have explained the problem, offer the lender a solution. Of course, at this point, you will suggest the outcome you are seeking. For example, "We feel that a loan modification will be advantageous to both of us."

USING A FORBEARANCE AGREEMENT TO STOP FORECLOSURE

If your loss of income is a temporary situation, you can explore the possibility of a Forbearance Agreement. Because this requires lender approval, you will need to work closely with the lender. In summary, the Forbearance Agreement allows the borrower to remain in the house and it protects your credit score, other than any late mortgage payments. The borrower agrees to keep mortgage payments current going forward. The Forbearance Agreement includes a repayment plan for the delinquent payments as well as all accrued fees. In general the Agreement will postpone or reduce the payments for a limited specific time period. During this time frame, interest accrues and remains the borrower's responsibility. This accrued interest is added to the principal balance of the loan. The lender agrees not to foreclose as long as the borrower remains in compliance with the Forbearance Agreement. It should be emphasized that this is not a long term solution but can be very helpful to borrowers with a temporary loss of income. To explore this option, the borrower should contact the lender's Loss Mitigation department.

USING A SHORT SALE TO STOP FORECLOSURE

A short sale is described as a sale of property where the net proceeds from the sale are insufficient to pay off the existing mortgage. Using a short sale to stop foreclosure is not the most pleasant route for a borrower. However, if other options are not available to the borrower, it may stop foreclosure. The short sale requires the lenders approval. The borrower needs to prove that a financial hardship exists. Again, this will require a hardship letter (described above under Mortgage Loan Modification). Frequently borrowers are required to bring money to the closing to finalize the transaction. In the current economic climate, lenders may be willing to negotiate a short sale because it is usually faster and less expensive than foreclosure. A short sale will adversely affect your credit although it has less affect than a foreclosure. Borrowers should consult a real estate attorney when considering a short sale.

A REFINANCE MAY STOP FORECLOSURE

It is possible for borrowers to stop foreclosure by refinancing the mortgage. If a mortgage is delinquent as the result of an ARM loan that was reset and substantially increased the payment, an FHA refinance may be possible. For borrowers in this situation, there are other requirements for qualification. The borrower's ARM interest rate was reset, a good payment history until the reset, verifiable consistent income, and the income must be sufficient to make the mortgage payments as well as other monthly expenses. With the current low interest rates and relaxed qualification requirements, borrowers that can refinance should seize the opportunity.

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THE TOOL OF LAST RESORT - BANKRUPTCY

While it is true that bankruptcy may stop a foreclosure, this is definitely a tool to be used as a last resort. Bankruptcy will stop the foreclosure and allow time to work out a plan to keep the home. For some borrowers, this may be the ideal option. Bankruptcy is a complicated process and requires the advice and assistance of an attorney that specializes in bankruptcy law. Borrowers need to note that your credit score will be adversely affected for several years.

A FINAL NOTE REGARDING FORECLOSURE

Anyone facing foreclosure needs to actively and persistently explore the available options that can stop foreclosure. The lenders do not want to own your home. It is advantageous for both lender and borrower to stop foreclosure.

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