Avoid
Foreclosure: Seeking Alternatives Proptly Can Save Your Home
By Sharon Secor, Staff Writer
Mortgage foreclosures are happening at a startling rate in
today’s market, making it more important than ever for
consumers to be aware of the facts involving home loan default
and foreclosure. The most recent statistics gathered by the Mortgage
Bankers Association show a record setting number of foreclosure
filings, the highest since their survey began 55 years ago. Some
sources are citing a ninety percent rise in foreclosures in the
twelve month period between May 2006 and May 2007. However, borrowers
can avoid becoming part of this trend with a bit of foresight
and quick action at the first sign of trouble with their home
loan.
Unforeseen circumstances can effect even the most fiscally responsible
among us, causing financial strain and missed or delayed payments.
Homeowners can fall behind in monthly home loan payments due
to an unexpected change in employment status, a sudden accident
or illness, or a death in the family. If not properly handled,
such issues can lead to home foreclosure. However, in most circumstances,
foreclosure can be avoided if the consumer is proactive in addressing
financial problems.
Among the most frequent mistakes made by consumers who are
facing financial difficulties is poor communication. While discussing
the problem with your lender can be uncomfortable and intimidating,
it is crucial to avoiding foreclosure. Most lenders are as interested
in avoiding the foreclosure process as you are, and will work
with you to find a solution that can save your home.
Most lenders make a variety of programs available to borrowers
who find themselves embroiled in temporary financial difficulties,
meant to help avoid foreclosure. Loan modification agreements
are quite common, allowing the borrower to spread the outstanding
balance out over time, or a simple re-payment agreement may be
all that is necessary. Some lenders will offer a financially
troubled borrower the option to defer payments or interest for
a fixed amount of time, allowing a bit of time to put matters
in order. This option will extend the term of the loan, but can
be very advantageous in a short term financial crisis.
Much of the recent upswing in foreclosures has been associated
with variable rate loans, or ARMs. These types of home loans
often offer a low interest rate initially, and then adjust to
reflect the prevailing market rate on a predetermined rate adjustment
schedule. Interest rates on many of these loans have risen significantly
in the current economic climate, leading to much higher monthly
payments in many cases.
Borrowers that financed a home purchase with any of the many
types of variable rate mortgages on the market today may find
refinancing into a fixed rate loan to their advantage, especially
if it is done before payments become unaffordable. Refinancing
is easier to arrange if it is done before your credit rating
is affected by late or missed mortgage payments. A careful review
of the original loan agreement to determine exactly what your
payment will be after the next adjustment can allow the borrower
to anticipate trouble well in advance, giving ample time to plan
a solution.
Acting quickly is the key to avoiding foreclosure. While it
can be difficult and embarrassing to admit financial problems,
avoiding it can only compound your problems. The longer you wait
to address the issue with your lender, the fewer options you
will have in solving your problem. Calling your lender immediately
when circumstances arise that could cause late or missed payments
shows good faith. With a clear indication of your commitment
to meet your financial obligations, lenders will be quite likely
to work harder to find the right solution to help you through
your financial difficulty.
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