HomeRetention.org & HomeRetentionToolbox.com - Advocates For Foreclosure Prevention & Solutions

Well the natural question for the homeowner in default is How Do I Stop foreclosure?

Problem:
Negotiating workouts with lenders and Mortgage companies is often the best method for resolving a pending Foreclosure. Unfortunately, this process is stressful and intimidating for homeowners, especially if it has gotten to the pre-foreclosure stage and the lender is asking for all the arrearage or backpayments up front and threatening to foreclose now. They sometimes act as if they would not hesitate in taking the property back and try to intimidate and pressure you into payment arrangements that most certainly would result in you losing your home aka foreclosure. Many homeowners have even tried to refinance or sell thier home to avoid foreclosure but many are unsuccessful because of either poor or worsening credit, little or no equity and current market conditions such as declining property values which sometimes results in an upside down position. (you owe more than what the property is worth)

Meanwhile, banks put homeowners in the hands of their collection departments. And they can be relentless. They call at all hours, at home, at work, some even call their neighbors. While there may be a few lenders who try to be helpful and review the homeowners situation to see if a program can help, most homeowners do not understand the guidelines for these unknown programs and tell lenders what they think they want to hear. And the lender requires homeowners to meet these unknown underwriting guidelines. Often approving a forebearance plan that will not fit the homeowners budget. The key is to force or get the lender to approve a loan modification where the back payments and legal fees are tacked onto the end of the loan, resulting in payments that are far lower than a forebearance plan.

a) Make Sure You're Talking With The Loss Mitigation Dept.

You’re going to want to deal with the loss mitigation department of your lenders, but you may not be put into contact with them until you’ve missed several payments. Instead you might be dealing with the collections department as I stated earlier, which wants you to pay up ASAP and doesn’t offer alternatives other than a "forebearance plan". Thus, if you’re serious about getting out of debt and keeping your home, you have to connect with your lenders loss mitigation team/dept.

b) Have Information ready when you call

To help you, lenders will need:

Your loan account number
A brief explanation of your circumstances
Recent income document
Pay stubs
Benefit statements from Social Security, disability, unemployment, retirement, or public assistance
Tax returns or a year-to-date profit and loss statement, if self-employed
A list of household expenses

Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a “loan workout” package. This package contains information, forms and instructions. If you want to be considered for assistance you must complete the forms fully and truthfully and return them to your lender quickly. Your lender will review the complete package before talking about a solution with you.

c) Call your lender to discuss this option: Loan/Mortgage Modification

Loan/Mortgage modification: If you can make payments on your loan, but don’t have enough money to bring your account current or you can’t afford your current payment, your lender may be able to change the terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:

Adding the missed payments to the existing loan balance.
Changing the interest rate, including making an adjustable rate into a fixed rate.
Extending the number of years you have to repay.

Be prepared during contact with Servicer/Lender

Before you have any conversation with your loan servicer/lender, prepare. Record your income and expenses, and calculate the equity in your home. To calculate the equity, estimate the market value less the balance of your first and any second mortgage or home equity loan. Then, write down the answers to the following questions:

* What happened to make you miss your mortgage payment(s)? Do you have any documents to back up your explanation for falling behind? How have you tried to resolve the problem?
* Is your problem temporary, long-term, or permanent? What changes in your situation do you see in the short term, and in the long term? What other financial issues may be stopping you from getting back on track with your mortgage?
* What would you like to see happen? Do you want to keep the home? What type of payment arrangement (loan mod, forbearance, refi etc.) would be feasible for you?

Throughout the foreclosure prevention process:

* Keep notes of all your communications with the servicer/lender, including date and time of contact, the nature of the contact (face-to-face, by phone, email, fax or postal mail), the name of the representative, and the outcome.
* Follow up any oral requests you make with a letter to the servicer/lender. Send your letter by certified mail, “return receipt requested,” so you can document what the servicer/lender received. Keep copies of your letter and any enclosures.
* Meet all deadlines the servicer/lender gives you.
* Stay in your home during the process, since you may not qualify for certain types of assistance if you move out. Renting your home will change it from a primary residence to an investment property. Most likely, it will disqualify you for any additional “workout” assistance from the servicer/lender. If you choose this route, be sure the rental income is enough to help you get and keep your loan current.