March 25, 2009

Facing foreclosure? Do things the right way

Even though Texas has been very fortunate and eluded much of the real estate-related trouble facing other parts of the country, there are some hard-working Texan families who are facing an absolute nightmare – the prospect of losing their home to foreclosure.

If you’re among them, I encourage you to stay positive during this difficult time and do things the right way. Yes, there’s definitely a right way (and several wrong ways) to address an impending foreclosure on your home.

Let them know

There are circumstances – job loss, unexpected reduction in income, medical expenses, significant lifestyle changes or other situations that can cause normally solvent, responsible homeowners to fall behind on monthly payments.

If you suspect that going to have trouble meeting your loan obligation, contact your lender. Many people are intimidated or too embarrassed to initiate this interaction, but trust me … go to them before they come to you. There are a number of options your lender may have available so you can either stay in or sell your home.

How to hang on

If you wish to keep your home, there are several routes that your lender may offer.

Forbearance is a temporary reduction or suspension of your mortgage payments. This option is frequently combined with reinstatement, a lump sum payment of your obligations by a specific date. These are a viable option if you know you’ve got, say, a sizable tax return on the way.

The lender may offer a repayment plan in which the company agrees to combine a portion of what is past due with your regular monthly payment. After a fixed amount of time, you’ve made up the past-due amount.

In some cases, the lender may even agree to modify some terms of your loan.

If you must liquidate

Retention is not always an option, but that doesn’t mean foreclosure is inevitable. If keeping your home is not realistic, there are some non-foreclosure choices available, as well.

A short sale (or short payoff) occurs when the house is sold for less money than is owed on it. If you’re able to find a buyer for the property, the lender may agree to write off the difference.

A deed-in-lieu-of-foreclosure involves you voluntarily transferring the title to your home to a mortgage company. The lender then attempts to sell the property to recover part or all of the balance of the loan that you owe.

An assumption permits a qualified buyer to take over your mortgage debt and make the mortgage payments. Even if your mortgage is non-assumable, your lender may make an exception. As a result, you may be able get out from under your property and avoid foreclosure.

Watch out for foreclosure-prevention scams

The sad truth is that there are sharks out there who target homeowners unable to meet their mortgage commitments or anxious to sell their homes.

There are several kinds of scams. Perpetrators of these types of fraud can be difficult to find, because they often jump around, scam as many homeowners as possible, collect their money, and move on to the next area.

Momma always said

Stay sharp – and remember what your mother told you … if it seems too good to be true, it probably is. But despite this solid piece of maternal advice, people fall prey to these opportunists.

What are some warning signs?

• You are approached with an unsolicited "rescue" offer
• You are offered only vague explanations about how the plan helps
• You are asked for upfront payment to begin services
• Your “rescuers” claim that you must send your home mortgage payments directly to them for the service to work
• You’re specifically asked not to contact your lender
• The “counselor” guarantees a success rate of 100 percent
• Someone (other than your lender) attempts to convince you to sign over the deed to them

Find legitimate help

As I've touched on, if you find yourself facing foreclosure, initiate contact with your lender …remember, they don’t want your property. They want your mortgage payment.

After that, visit Hud.gov to find a HUD-approved housing-counseling agency to provide you with the information and assistance you need to avoid foreclosure.

Also, as part of President Obama's comprehensive Homeowner Affordability and Stability Plan (HASP), you may be eligible for a special Making Home Affordable (MakingHomeAffordable.gov) program to modify or refinance your loan to reduce your monthly payments and help you keep your home.

To read more about real estate, I encourage all Texans to visit TexasRealEstate.com – the online source for consumer-friendly information about real estate in the Lone Star State.

Sources: Freddie Mac; HUD; Fannie Mae; MakingHomeAffordable.gov