What to do When Facing Foreclosure

High Inventories of Condos By Christine Hardenberger

Crippled by the credit crunch and falling property values, millions of homeowners are facing the possibility of foreclosure. The delinquency rate is the highest it has been since at least 1985 when the Mortgage Bankers Association started monitoring the market place. It’s a dreadful situation for many people, who have no idea what they should do to try and save their homes.

Traditionally, homeowners were advised to notify their lenders as soon as they realized that they were running into trouble. Conventional wisdom held that a lender would rather work with a borrower than foreclose. No lender, it was thought, wanted to own a house. However, as delinquencies increase exponentially, homeowners are abruptly finding out conventional wisdom is out of date.

Lenders have been inundated by the onslaught of borrowers who can no longer afford their homes. The work-out plans on which they have always relied no longer apply. What are homeowners to do when their lenders are unable or unwilling to help?

“I’ve always recommended that anyone who is having difficulty making their mortgage payment should call their lender immediately. I still think that’s good advice,” said Peter Scott, a loan officer with Sun Trust Mortgage. “However, I think people now have to take a more proactive approach in trying to save their homes. The lenders just don’t seem to have enough tools in their toolbox. Some times borrowers need to come up with their own solutions.”

The essential problem with lenders standard solutions is that they rely on getting their mortgage money back from the sale of property. In most areas of the country this is no longer possible. A stalled housing market has led to longer marketing times and deflated prices.

Homeowners find themselves in the detrimental position of owing more than their home is worth. Consequently, when a lender offers to forgive a few late payments, it’s just temporary and doesn’t address the real problem of the home being unaffordable for the homeowner.

If you find your mortgage payments too high to handle, there are some steps you can take to attempt to fix the problem. Start with a call to your lender. Lenders will usually ask you to fill out a financial statement and return it with supporting documentation. This will allow mortgage companies to assess your financial situation and suggest possible solutions. Problems will occur when your situation is not a fit for the lender’s usual course of action. You need to find someone who can really help. Most likely, it is not the first person to whom you speak. These front-line employees usually only have limited authority to change the standard programs.

Ask to speak to a supervisor. Once you get a supervisor on the line, ask if they have the ability to craft a custom solution for you. If they do not, find out who has the authority. Once you get to the right person, explain your situation. You need to be completely honest. Let the lender know exactly what it will take for you to be able to meet your obligation. Can your interest rate be lowered? Can your term be extended? Can they suspend payments until the house sells? If you try to sell your home, will they accept less than the full amount due?

Even after your concerted efforts, you may still not be offered a workable solution. Don’t give up. Draft a letter to the CEO explaining your predicament and outlining your plan to meet as much of your obligation as possible. Discuss what measures you feel need to be taken in order for you to either save your home or to stall foreclosure until the home is sold. A well-crafted letter to the head of the institution will often get noticed and you will likely receive a call from someone who may actually be able to help.

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