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Take the Right Steps for Avoiding Foreclosure

Most homeowners have a mortgage on their homes and routinely make monthly payments to stay current and protect the ownership of those homes. The terms of the mortgage contracts were well-thought-out and agreed upon by the homeowner and their lenders. That’s why a borrower can feel foolish and embarrassed when a calamity strikes and the mortgage payments become difficult to pay.

Such problems can seem very personal and usually have something to do with a job loss or health crisis. The mixture of personal problems with business arrangements can be very difficult for the homeowner. The real problem begins when the homeowner allows embarrassment to get in the way of dealing with the lender.

How to Do It

If the borrower can understand that defaulting on a mortgage is a problem for the lender as well as the homeowner, it might be easier to ask for help in avoiding foreclosure. If the borrower understands that mortgage problems are not unusual, the feeling that he is asking for special treatment can be overcome enough for him to seek help in avoiding foreclosure. If the borrower can see that the possible repayment plans for late payments are easy to understand and follow, he may actually manage to be successful in avoiding foreclosure.

The facts are that mortgage lenders lose an average of nearly $60,000 on every foreclosure, that well over half of mortgage borrowers fall dangerously behind on payments and that lenders are both motivated and experienced in arranging repayment plans to assist in avoiding foreclosure. As soon as a homeowner realizes that there is going to be a problem in making payments, he should contact the lender and explain. If necessary, a third party can negotiate on behalf of the borrower.

There are five types of plans most often used for avoiding foreclosure. When a short-term drop in income or increase in expenses leads to the missing of several payments but results in a return to the previous ability to pay, a partial reinstatement plan can be set up. This allows the payer to resume regular payments when it is possible while making up the missed payments in smaller payments over the course of a specific amount of time. Another alternative is short-term forbearance which can suspend as many as three payments or reduce payments for as many as six months.

As in the partial reinstatement plan, a repayment plan allows the missed or reduced payments to be made up while resuming the full payments. When necessary, forbearance can be put on a long-term basis stretching between four to twelve months. When needed, forbearance can take the pressure off and result in avoiding foreclosure. If the income loss is permanent, modifications can be made to the loan agreement. The loan period can be extended for lower payments or interest can be renegotiated. Sometimes the FHA will pay the money for missed or late payments to bring the loan up to day and arrange for repayments after the home is sold or the mortgage is paid off. Successfully avoiding foreclosure is best for everyone involved.