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How to Avoid Foreclosure: Know Your Options


by: Rob Sabo
01 Dec 2010

Are you underwater in your home? If you are buried by your payments and foreclosure is imminent, there are a number of ways you can stave off the foreclosure process and get back on track with a payment schedule that fits your budget--and allows you save your house.

Contact Your Mortgage Company

The U.S. Department of Housing and Urban Development's (HUD) top tip for avoiding foreclosure is to contact your mortgage company's loss mitigation department and explain your situation. They'll want a complete accounting of your income and expenses, but oftentimes they'll work out a solution with you that allows you to avoid losing your home. Bear in mind that the last thing the mortgage company wants is another repossession on its books.

Plan in Advance to Avoid Foreclosure

The Federal Home Loan Mortgage Corporation--better known as Freddie Mac--says it's best to call your lender before you start falling behind on your payments. There are a number of programs in place to help you avoid losing your home, including:

  • President Obama's Making Home Affordable Program
  • Refinancing
  • Requesting a forbearance
  • Modifying your loan

If you are making your payments but you can't refinance because you owe more than your home is worth, the Making Home Affordable Program can help you reset your mortgage through its refinancing plan. The program's loan modification plan is for homeowners who are delinquent in their payments and face foreclosure.

If you have enough equity in your home, you may be able to refinance with a new mortgage that pays off your old one. Be sure to shop for the best interest rates, Freddie Mac says. A forbearance is a temporary reduction or postponement of payments that allows you to gather your financial resources. Lastly, a loan modification is an agreement between you and your lender that changes the original terms of your mortgage loan to make payments more affordable.

Sixty-percent of homeowners who face foreclosure are not in any avoidance program, says the State Foreclosure Prevention Working Group, a body made up of Attorneys General and state banking commissioners. If you are struggling to save your house, examine your options carefully and seek counseling from your lender and mortgage professionals.

Sources:
How To Avoid Foreclosure • http://www.hud.govhttp://www.hud.gov/offices/adm/hudclips/forms/files/pa426h.pdf • U.S. Department of Housing and Urban DevelopmentAvoiding Foreclosure • http://www.freddiemac.comhttp://www.freddiemac.com/avoidforeclosure/ • Federal Home Loan Mortgage CorporationCassiano Travareli • 60 Percent Do Not Avoid Foreclosure, State Attorneys Say • Jan 22, 2010 • http://www.stopforeclosureshelp.comhttp://www.stopforeclosureshelp.com/blog/avoid-forelosures/60-percent-do-not-avoid-foreclosure-state-attorneys-say/ • Stopp Foreclosures Help