Saturday, October 20, 2007

Don't accept foreclosure without consulting a loss mitigation counselor first

The Tennessean, Saturday, 10/20/07

Believe it or not, mortgage companies do not want to foreclose on your home. They are in the finance business and not the real estate business. If you got behind on your mortgage due to a hardship and now the crisis is over, you can usually keep your home. Even if you did not have a hardship and simply mismanaged your money, you may be able to keep your home, if you can convince the mortgage company you can afford your house.

As a mortgage default and loss mitigation counselor, I am able to help most people I counsel avoid foreclosure and keep their home. If you are facing foreclosure, try to get an appointment with an experienced loss mitigation counselor. Unfortunately, there are not enough loss mitigation counselors to serve the people who need our service and most homeowners must deal with their mortgage company on their own. If you must deal with the problem on your own, here are some things you ought to know:

• Don't just ignore the problem. Many people who fall behind on their house payment simply put off dealing with the problem. As they fall further behind, they quit opening their mail or answering the phone. The sooner you deal with the problem, the more likely you are to find a solution that will help you save your home.

• Prioritize your bills. If you are facing financial difficulty and can't pay all your bills, pay the essential bills first. Pay secured debt before you pay unsecured debt. If you have two mortgages on your home, pay the first mortgage before you pay the second mortgage.

• Know that there are "work-out" options. While an FHA mortgage may offer more work-out options than other type of mortgages, almost all mortgage companies have programs to help you save your home.

• Reach the right person. When you first call customer service at most mortgage companies, you are talking to a person who is basically a bill collector, who does not know the work-out options that are available or does not have authority to offer them. Ask for the "loss mitigation department" or "work-out" department.

• Think before you give "financials." Sometimes your mortgage company may wish to take "financials" over the phone; other times, they may send you a packet to complete. "Financials" is a listing of your income and expenses. The mortgage company is trying to determine if you can afford the house and if they should work with you to help you keep it. How you complete the "financials" is extremely important. Usually, you need to show a positive cash flow, so you may wish to cut nonessential expenses such as cell phones, cable TV, gym and spa memberships and church contributions before you give your financials to the mortgage company. Another way you may increase your cash flow is by decreasing your income tax withholding.

• Don't agree to a plan you can't keep. Sometimes desperate homeowners will agree to a repayment plan, knowing they cannot afford the new payment amount. If you default on a repayment plan, the mortgage company will be reluctant to work with you on other work-out options.

• Consider bankruptcy. Sometimes a bankruptcy is the solution, if you cannot get a work-out plan from your mortgage company that lets you save your home. Talk to a bankruptcy attorney to see if bankruptcy is an option.

• Remember, a house is just shelter. Sometimes it is best to sell the home before it forecloses, surrender the home by offering a deed-in-lieu of foreclosure, or let the foreclosure occur. We develop an emotional attachment to our home and hate the thought of losing it. However, if you got a bad loan, simply can't afford the house you purchased, and have no equity in the home, you are not really losing anything if you do "lose" it. Bad credit can be repaired. Three years after losing your home, you can again purchase a home. But next time you can prepare yourself, educate yourself, and do it the right way. Losing your home is not the end of the world

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