Foreclosure – Ways to Not go There or Do That

If you miss a credit card payment, you can end up having your credit cut off and debt collectors calling during dinner. But miss a mortgage payment and the consequences can be dire.

Homeowners who are financially strapped due to job loss, divorce or escalating loan payments may think they have the elbow room to put off a few house payments. But in fact, time is of the essence. Owners who have already missed a payment or are afraid they might miss one soon should contact their lenders immediately to work out a repayment plan.

Without that communication, the chances of losing your home to the bank are quite good. Though the time line varies by state, the process usually involves the lender notifying you on an arrears, then calling to discuss the problem. By the time you’ve missed a third payment, you’ll be receiving some serious correspondence demanding immediate response. If a payment is not made quickly, the odds are good that your house will be selling on the courthouse steps in the near future.

Such drastic consequences may be avoided by getting and staying in touch with your lender. Communication is the key to keeping your house. Read the written notices they send. Read your loan documents to see what the lender can do in the event that you aren’t able to make payments. Set up an in-person meeting to resolve the problem. Most lenders do not want to become homeowners; they’d prefer to arrange different terms to help you through the crisis.

After discussing the problem with your lender, get busy finding ways to finance the payments. Perhaps that means temporarily taking on a second job, or settling for a lower-paying job to replace one that’s been lost. It may mean cashing in assets you already have, such as cars, jewelry or insurance policies. And it most frequently means sitting down with a sharp pencil and making drastic changes to monthly expenses. Evaluate the costs and need of items such as cable TV, dining out and club memberships. Look at lowering you credit card payments and rerouting the money to the mortgage.

In some cases, the only way to save the equity invested in a house is to sell it. But the downturn in real estate prices may mean sellers won’t get a price that covers their loan and equity. But to avoid ruining a good credit history, a last resort might mean a short sale, in which the bank approves a sale of the property for less than what is owed in the mortgage. All proceeds of the sale are turned over to the bank and the homeowner moves on to start over.

Whatever your individual mortgage situation, know that there is assistance available. The Housing and Urban Development office offers free counseling, as do consumer-oriented nonprofits such as the Consumer Credit Counseling Service. In light of the recent economic downturn, more churches are now providing classes and workshops on budgeting and financial restructuring. No matter what the situation, homeowners should be extremely cautious about dealing with companies that charge fees for mortgage assistance or that require signed documents to act as go-betweens with lenders. A bit of online searching quickly unearths resources in your local area that will shepherd you through whatever housing crisis you face.

Photo courtesy of ResPres: http://www.flickr.com/photos/respres/