How to Avoid Foreclosure

The grim topic of foreclosure was boarderline taboo just a year ago, rarely mentioned above a whisper. But now the "F" word has taken on new meaning, uttered repeatedly on the nightly news and discussed at kitchen tables across the country. No need to panic or lose hope. There is the possibility of saving your home and your credit. I decided to use my knowledge as a foreclosure specialist for JP Morgan Chase to write this article so that I can help as many homeowners as possible to save thier homes.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• A list of your monthly living expenses
• A realistic average monthly income
• Determination & faith

1. TAKE A LOOK AROUND: BIG PICTURE
   Surely you didn't plan on being on the brink of foreclosure when you signed on the dotted line to buy your dream home three years ago. Now you've fallen four or more months behind and your lender has started sending intent to foreclose letters that terrify you and your spouse, with good reason. So what do you do now? First of all, time to take a good hard look at the big picture. Can you afford to maintain your current lifestly? Here's how to determine the answer to the question. If somehow all the delinquent house, car and credit card payments were caught up, could you afford to maintain the minimum payments going forward? If the answer is no, then you are living beyond your means. Downsizing is your only alternative. Coming to this conclusion is very difficult. It requires you to be totally devoid of emotion and rely strickly on reason and logic. And unless you are a robot, most humans find this next to impossible. Here's an example: you've made $50,000 over the past 2 years but you 'know' you'll break the 6-figure mark any day now, right? So you can afford to live a 6-figure lifestly today, right? Wrong! Base your lifestlye on the past earnings pattern, NOT what you feel, suspect, wish or will your income to be in the future. Seems so basic, but time and again I counsel homeowners who live on anticipated income that never comes in. If that means making a clean break from your current mortgage payment so that you can figure out how to live within your means, cut your loses and literally move on. Contact a real estate agent and sell your house as quickly as possible. Even if you're upside down on the mortgage, ask your lender how to request a short sale (more details below). If you just need a little extra income, seriously consider taking in a roommate or getting a second job. And last but not least, prioritize the mortgage FIRST! No matter how nasty the threats from other bill collectors, paying off other creditors first while your mortgage payments fall farther and farther behind is a big mistake!
   
   On the other hand, if the delinquency is your only obstacle to being back on track, you have some bargaining power. Definatly downsize as much of the unneccessary expenses as possible, but no need to unload the property just yet.
2. PICK UP THE PHONE: CALL YOUR LENDER
   You may assume that your mortgage company only wants to badger you for falling behind, so why bother calling if you don't have the money? While they would love for you to call and pay what you owe, they're also prepared to help if you can't. There are multiple work-out options available based on your particular hardship. Here's a list of each and a brief description:
   
   1-Reinstatement: bring the account completely current by paying the entire delinquency in full. Many people feel that this option is unavailable to them so they immediately rule it out, don't! There are non-profit organizations that will help you catch up on your late payments. The first place to inquire is your church (just one more reason to join a church if you haven't). To find other agencies which offer free assistance to homeowners, visit www.hopenow.com.
   
   2-Repayment Plan (Forebearance): pay back the delinquent amount in addition to your regular monthly payment over a period of 6-12 months based on what you can afford. Obviously this will increase your monthly payment, so if your financial situation has not improved, this isn't the option for you. Most people will insist on unrealistic re-payment terms out of despiration to keep their home only to default shortly after because the payments werent affordable to begin with. Don't agree to a plan you can't afford. Request another option instead.
   
   3-Short Sale/Short Pay Off: selling the home for less than the entire obligation owed to the lender. The majority of lenders will determine the current market value of your home based on recent sales in your neighborhood. This is what they will use to determine whether you are being offered a fair price for your home. So be prepared to fight if you plan to sell for drastically less than you borrowed.
   
   4-Modification: takes your delinquent amount and adds it to your principle loan balance; may also fix an adjustable rate; raise your rate or lower your rate. This is an ideal fix for a borrower who has fallen behind and has no way to catch the delinquency up, but can afford to maintain future payments. Be prepared to document your income with tax returns, paystubs and bank statements. Also be aware that this can be a lenghty process and approval is not guaranteed.
   
   5-Deed in lieu: this simply means that you turn the keys over to the lender. You can call your lender to talk out the details.
3. GET BACK ON TRACK
   Once you've decided on an agreeable solution with your lender, stick to it! The worst thing you can so is default on a work-out agreement. Once a lender has extended assitance to you in good faith and the agreement is broken, you weaken your credibility. Future negotiations will be more dificult to obtain and you risk facing foreclosure if this happens. Always keep in contact with your mortgage company so that you can avoid miscommunication and uneccessary actions. One phone call goes a long way!

Tips & Warnings

• Never pay a company to assist you with resolving your foreclosure! A reputable company offers this service free of charge.