George Wolf
Jul 8,2008
In: Foreclosure Victims

Escaping Foreclosures

How to escape from foreclosures? Without pining for the past it is best to face the problem and take the bull by the horns. The priority right now is to get out of the mess.

Why is it imperative that foreclosures should be avoided? This is mainly because the credit history of the borrower gets stained and this will hamper future prospects either to rent one or to get a new loan.

The first thing is that as soon as one gets to feel that finances are wobbly it is time to contact the lender. When one defaults for 90 days the lender sends a letter of notice – NOD. The letter must not be ignored. Once the foreclosure ball starts to roll it is difficult if not impossible to pull it back. Each and every mail coming from the lender should be opened and responded to. Failure to open mails will not be taken as an excuse for avoiding court proceedings.

If contacting the lender proves to be difficult the next step will to contact a bonafide housing counselor – preferably one certified by HUD. This will serve a double purpose. On the one hand the borrower will be saved from scammers and on the other help will be available. There are round the clock toll free hot lines for foreclosure victims. The borrower must lay the cards on the table and discuss with the counselor budgeting schedules and how income can be balanced with expenditure by giving due importance to foreclosure problem. Counselors are experts in the field and know how this can be done.

Many borrowers trip because of not knowing mortgage rights. It is of prime importance to read documents line-by-line – preferably with the help of a legal advisor.

There are some alternatives. One is Forbearance. The lender will allow time for the borrower to get over the temporary difficulties and pay the past dues gradually while being current on the running installments. If that is not possible then refinancing and modification is a big option by which a new contract is entered upon with lower interest on a long term. If even that fails then the lender could give permission for Short Sales. The borrower sells the house and the lender is content to accept an amount that may be less than the loan. Both gain from it by avoiding foreclosure. A final option could be handing over the lien to the lender with the keys and walk away with a clean credit record without going through foreclosure. In this case the onus is on the lender to sell the REO or real estate owned house. Another route of escape is Partial Claim. By it the borrower may be able to avail of FHA Insurance funds. The borrower has to be at least four months lagging behind but not delinquent for over a year and be able to meet full mortgage commitments from henceforth. The lender has to file the Partial Claim with HUD and the latter will make backlog payments directly to the lender.