How to Avoid Foreclosure during The Recession and Beyond

What is foreclosure? It is a legal tool that a lender (usually a bank, but in the case of HUD housing, the federal government) can use to repossess a home if the owner defaults on too many mortgage payments.

It is very important for your overall financial well being to try to avoid foreclosure at all costs. Why is avoiding foreclosure whenever possible so important? Well, if your home is foreclosed on, this can have very serious ramifications for your credit, both now and in the future. In other words, if you ever want to qualify for future loans, you will want to avoid foreclosure in the present.

Difficulty: Challenging

Instructions

1. Make all of your mortgage payments, without exception. During a recession, this can be very difficult, especially if you are out of work. Do whatever you can to scrape up money for your mortgage even if that means cutting back (sometimes significantly) in other areas. Your mortgage must become your top financial priority if you want to avoid foreclosure.

2. Contact the bank’s loss mitigation department the minute you start experiencing financial difficulties. That is, if you suspect that you will not be able to make your mortgage payment this month, do not put your head in the sand in an attempt to avoid the problem, because the problem will not go a way if you do not take the appropriate action. The bank might be willing to work with you to solve the problem, but only if you get in touch with them at the earliest possible signs of a financial crisis. Do not wait to get in touch with them. The importance of not waiting cannot be over-emphasized.

3. Provide the bank's loss mitigation team with all of the requested documentation. Conceal nothing. Reveal all. This may include all of your financial records, including all of your monthly statements, your proof of income (such as pay stubs) and any other relevant and/or requested materials. It is not a fun experience, by any means, but the more open and up front (and polite and diplomatic) you are with the bank’s loss mitigation staff, the more likely they will be to work with you. One of the options that your lender may consider might include a temporary reduction of your monthly payments.

4. Adhere strictly to whatever revised payment plan your lender’s loss mitigation team devises to help you. Do not deviate at all from the revised payment plan because this plan may be your best chance to save your home.

Tips & Warnings

• Avoid scam artists who prey on people who are struggling to pay their mortgages or secure refinancing. If you work with your own bank’s loss mitigation department exclusively, you will not have to worry about getting scammed.

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on 10/5/2009 Thank you for your great advise 5*