Avoiding A Home Foreclosure

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I think middle-income people need to know that housing counselors are not just for low-income families.

— Doug Robinson, NeighborWorks America spokesman

Getting Started to Avoid Foreclosure

No matter where you are in the process, it's never too late to contact a counseling agency because options still may be available to you, says Setina Briggs-Kelly, a housing counselor with GreenPath Debt Solutions, a nonprofit that offers foreclosure-prevention services.

"We've seen people who have been threatened by foreclosure for over a year now, and the foreclosure proceedings are just now starting," Briggs-Kelly said. "Most servicers start the foreclosure process within that third or fourth month of (your) being delinquent."

Where does a homeowner start if you want to try to keep your home?

The first step is to contact your mortgage servicer and explain your circumstances, says Faith Schwartz, the executive director of Hope Now, an alliance of mortgage servicers, investors, mortgage insurers and nonprofit counselors.

"Call early," Schwartz said. "You need to call early because if you're not getting engaged early in the process, it gets harder and harder, and then you owe late fees."

What to Bring to a Counseling Session

• List of expenses

• List of debts

• Pay stubs

• Bank statements

• Monthly mortgage statements

• Correspondence from the mortgage company

• Closing papers

Connect with a Counselor

Doug Robinson, a NeighborWorks America spokesman, advises homeowners to find and call a counselor certified by the Department of Housing and Urban Development after you contact your mortgage servicer. NeighborWorks is the nonprofit group that manages the National Foreclosure Mitigation Counseling program, which is funded by the federal government.

Robinson says counseling isn't limited to only one socioeconomic group.

"I think middle-income people need to know that housing counselors are not just for low-income families," he said. "They are for any homeowners, aside from the investor, who is looking not to lose their home to foreclosure."

Homeowners who work with a housing counselor are 70 percent more likely to save their homes from foreclosure than demographically similar homeowners who do not see a counselor, Robinson said.

But avoid businesses or individuals who charge money to give foreclosure advice, Schwartz said.

"The servicers and the bankers are the ones who have to implement change for that borrower," Schwartz said. "If you keep involving middlemen who charge money for it, there is just no value there."

Homeowners should bring certain financial documents, such as a list of expenses and debts, mortgage statements and pay stubs, to their foreclosure prevention session.

"We want clear, honest transparency of your financial situation," Robinson said. "Without that, you can't put together a compelling hardship letter to send to the servicer that will help you obtain the best, most affordable mortgage modification."

Evaluate Your Options

Now that you have your documents ready, what can you expect from a counseling session? Homeowners will receive a financial assessment and options they can pursue, says Mary Ellen Nicol, a certified housing counselor with CredAbility, a nonprofit that offers debt counseling and foreclosure prevention sessions.

"We want to advise about possible workout options based on their specific situation," Nicol said. "We want to build an action plan, and then advise the homeowners of any resources or any strategies that can help with going forward."

Options might include forbearance, a repayment plan, a deed in lieu of foreclosure or a short sale. Counselors also would explore whether a homeowner is eligible for loan-modification programs that fall under the Making Home Affordable initiative, a federal foreclosure-prevention program.

The main loan-modification programs -- the Home Affordable Refinance Program and the Home Affordable Modification Program -- can either modify or refinance your mortgage payments.

The Home Affordable Refinance Program is available to eligible homeowners who haven't fallen into delinquency but have been unable to refinance because their home value has decreased. You must also have a loan with Fannie Mae or Freddie Mac to be considered.

The Home Affordable Modification Program will lower mortgage payments for eligible homeowners who are having difficulties making payments for reasons unrelated to unemployment.

The Making Home Affordable initiative also includes foreclosure alternatives, such as a short sale, for homeowners who cannot afford their homes.

After you've worked with a counselor, you can call the lender directly to discuss your options. The lender also will evaluate whether homeowners qualify for any of the government programs and any of their own loan-modification programs.

If you don't want to contact the lender on your own, then the housing counselor can often serve as an intermediary.

By taking steps to avoid foreclosure, setting priorities and knowing your options, homeowners can feel a bit more empowered in a stressful situation.

"You feel that you're somewhat in control of your destiny in a way," Robinson said. "If you keep ignoring letters and phone calls, you're not."

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