Purchasing
- Your first home
- Your next home and move
- An investment property
- A vacation home
Refinancing
- To tap your home equity
- To save money
- To avoid rate increases
- To lower monthly payments
Home Equity
- Loans and lines of credit
- Finance major expenses
- Consolidate Debt
- Invest
Figuring out a foreclosure
After you have bought a home and taken out a mortgage, you begin to make the monthly payments.
If for some reason you default on a payment, your home will enter into the foreclosure process, and if you continue to miss payments it will eventually get taken away.
But before you get this far into the foreclosure process, there are many things your lender can do to help you out.
According to the article, “‘Workout’ to prevent home foreclosures,” by Terri Cullen of The Wall Street Journal Online, there are many things you can do to stop a foreclosure and maybe even stay in your home.
Cullen describes programs known as “workouts” that help the owner and lender essentially “workout” another alternative to a foreclosure, instead of just giving into the system.
“Workouts can take the pressure off homeowners with bill-repayment or loan-restructuring plans that roll the missed payments into a new loan or allow the borrower to catch up on delinquencies by increasing the amount of a few future months' mortgage payments.”
There is an increasing amount of foreclosures because interest rates are rising, and people are finding that their low monthly payments are now a thing of the past as payments become much bigger.
“If your finances suddenly become tenuous, don't wait until you've missed a mortgage payment to attempt to fix the problem, those in the home-loan industry say. ‘It's a very cold, hard world when it comes to debtor-creditor relationships and some lenders can be really tough once they know they have you over a barrel,’ says Ellery Plotkin an attorney with Cacace, Tusch & Santagata in Stamford, Conn., who represents homeowners facing foreclosure. ‘Make decisions now while you're still in control.’”
Sometimes you can sell your home in time to avoid a foreclosure, other times you need to get your lender or others involved. This is where the “workout” plan comes into affect.
“Experts say homeowners who reach out early are more likely to succeed in avoiding foreclosure. Through their loss-mitigation department, lenders may allow homeowners to modify their existing mortgage terms through a workout, to avoid the expense of proceeding with a foreclosure. A foreclosure can cost lenders more than $50,000 in attorney fees and closing costs, according to Ronald Khan, a real-estate attorney in New York. ‘Banks don't want to take ownership of homes, particularly in depressed markets where it may take months to sell,’ he says. Workouts typically take the form of a bill-repayment or loan-modification plan.”
Surprisingly, there could be a variety of options available to you, if you just reach out and seek help. Too many people just get the default notice and accept they are going into foreclosure.
“Loan-modification programs generally are granted when an individual's financial circumstances have changed for the worse, with no end in sight. They are essentially refinanced mortgages without any upfront costs. The lender may change the terms of the loan entirely, either by extending the loan term to make the monthly payment more affordable, or rolling the missed payments into the mortgage balance to bring the loan current.”
“It's up to the homeowner to explain what's wrong and work with the lender to come up with a solution. Take a hard look at your financial resources and your basic living expenses, and then consider what kind of payments you could realistically make.”
If you are honest and upfront with your lender, you will most likely be able to “workout” a solution to this horrible situation.