About Foreclosure Resolution

If you're facing foreclosure, you may feel relieved when a third party offers to intervene and prevent the loss of your home. But all homeowners should beware--the skyrocketing foreclosure rate has been accompanied by a proliferation of scam artists. And while there are legitimate foreclosure resolution agencies that, for a fee, can shoulder some of your burden, most of what they do, you can do yourself.

Time Frame

Foreclosure is the legal process by which your mortgage lender takes repossession of your home that is secured as collateral against your home loan. Officially, foreclosure begins when a Notice of Default is filed with the county recorder. However, as many as six months may elapse between your first missed payment and the Notice of Default filing. During that period, you can negotiate with your mortgage lender to avoid foreclosure.

Significance

Foreclosure resolution is the negotiation process between you and your mortgage lender that aims to save the lender the cost of foreclosure and save you from having a foreclosure on your credit history. At best, foreclosure resolution can help you keep your home. Foreclosure resolution does not require a third party representative, though a reputable foreclosure resolution service may make things easier.

Function

During foreclosure resolution, you tell the lender the nature of your financial distress and whether or not your money troubles are reversible. To determine if your home is salable, your lender will need to know the condition of the real estate market in your area and the value of comparable homes. With this information, the lender can calculate their net loss from foreclosure as opposed to other options.

Potential

Options for avoiding foreclosure are straightforward. You can find extra income and make arrangements with the lender to catch up on your payments. You may negotiate to restructure your loan with an interest rate reduction, an extension of the loan term or a reduction in principle. If you can't afford to stay in your home, you may negotiate with the lender to accept a short sale or a deed in lieu of foreclosure.

Considerations

Before hiring a foreclosure resolution service, contact a non-profit foreclosure resolution service such as NeighborhoodWorks. From nonprofit agencies, you can learn what foreclosure avoidance options are right for your situation and get in depth advice on how to communicate with your lender. Many homeowners find that with the help of public and nonprofit agencies, they're able to handle the entire foreclosure resolution process themselves, saving thousands of dollars. If in the end, you do decide to pay for foreclosure resolution, at least you'll be better informed.

Features

When you hire a foreclosure resolution service, choose one that has access to the decision makers at your lending institution. Without this, all you're getting is a very expensive consultant. Fees for foreclosure resolution are based on your loan amount and the complexity of your case. Typically, they range from $2,000 to $5,000. Check your local department of real estate licensing bureau for records on the foreclosure resolution company before paying. Usually, you should not pay in advance. Legitimate third party foreclosure resolution services will be upfront about what they can do for you. They'll offer multiple solutions, explaining the pros and cons thoroughly. They will not pressure you toward bankruptcy or using another service provider.

Warning

Never pay for foreclosure resolution "secrets" on the Internet. Also avoid "consultants" who do nothing but advise you, while you do the actual work. Especially beware of "investors" who ask you to sign a quit-claim deed so they can sell your home while leasing your home back to you; this is a scam, otherwise known as equity skimming. Be skeptical of all offers to resolve your foreclosure if you've already received a Notice of Default; at this point, to be sure you avoid scams, consult an expert nonprofit agency.

Resources

• NeighborhoodWorks
• California Loan Modification Scams and Foreclosure Consultant Frauds