I received a call to my radio show just before the end of the year. It was from a woman who had just opened her mail to find a letter from the bank stating that it was starting foreclosure proceedings
She told me how she had lost her job and used up all her savings to keep making her mortgage, home equity line of credit, and credit card payments each month. After a while, it was too much to manage, even after she got a new job.
What she wanted to know was where she could go to get help that would stop the foreclosure proceedings.
By the time you get a court date, it's a little late to unwind the clock. Instead, if you want to stop the bank from foreclosing on your house, the time to get help is before you've missed a single payment.
Most people know how to account for every dollar that comes in. It may not be your favorite task each month, but if money is tight and you're trying to make ends meet, you know when the budget is about to snap.
When you have a list of debts and bills, you should sort them from most important to least important. While all of the bills should be paid, the one that goes at the top of the list is the one that will cause your family the most damage if it isn't paid on time.
If I were organizing a list, it would read: Mortgage payment, home equity loan/line of credit payment, utility bills, car payment(s), credit card debt(s) and other bills.
Once you know that you won't have enough cash to go around, it's tempting to skip the biggest bill, which is typically your mortgage payment. But in some states, foreclosure is fast-tracked, which means you could find yourself receiving a foreclosure notice from your lender in as little as 60 days.
So let's back up: Once you know there isn't enough money to go around, and you know you'll be missing a payment, you need to call your lender. If you've already missed a payment, and your lender has called you, you need to pick up the phone and return the call. Talking to your lender is the best way to stop foreclosure.
Many borrowers have complained that when they call their mortgage company, no one picks up the phone. Or they get transferred from department to department.
The truth is, if you don't talk to the lender, and it doesn't get recorded in your file, it doesn't matter how often you tried to call. When it comes to foreclosure, "trying" doesn't count.
If you're having trouble reaching your lender, call a HUD-certified housing counselor, who may be able to reach out to your lender on your behalf. The toll-free number is 800-569-4287, or go online to www.HUD.gov/foreclosure/index.cfm.
Once you miss a payment, your lender will start sending you letters. If you want to avoid foreclosure, open the letters. These are supposed to contain information on how you can save your home.
To help you save your home, lenders can make changes to the terms of your loan agreement. The best time to do this is either just before or just after you miss your first payment.
Lenders can: (1) reinstate your loan (you'll catch up with everything you owe by a certain date; (2) offer forbearance (give you a few months off from making payments, while developing a plan to get you current on your loan down the line; (3) set up a repayment plan (where you agree to pay a little each month for the next six months or a year until you're caught up); or (4) modify your loan (this will change the terms so that the payments are more affordable).
All of the talk you're hearing about the government-sponsored solution to the mortgage crisis deals with loan modifications. The federal government is pushing investors who bought your loan to agree to modify the terms for the next few years.
When a lender agrees to modify your loan, it could mean that the missed payments will be added to the loan amount, or that the interest rate will be changed from a variable rate to a fixed rate, or perhaps it will be lowered to a different interest rate.
A final loan modification option is to adjust the amortization schedule, so that you have a longer loan term, but your payments each month are smaller.
For some borrowers, there's one other way to save your home: It's called a partial claim. A partial claim may only be available on certain loans and in limited circumstances. If you and your loan are eligible, you can set up an additional loan that will help you make up your missing payments.
This limited program is available to people who are several months behind in their home loan payments, and it allows them to become current on the loan. But the borrower's circumstances must be such that they have overcome the reasons why they couldn't make their payments and can make the future payments on their loan.
For more information, you can contact your current lender or get more information from HUD at www.hud.gov/offices/hsg/sfh/nsc/faqpc.cfm.
Contact Ilyce Glink through her Web site, www.thinkglink.com, by mail at Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022 or calling her radio show at 800-972-8255 from 11 a.m. to noon Sundays.