Thursday, September 4, 2008

How To Save Your Home From Foreclosure

(StatePoint) America's foreclosure crisis continues to hit home among families nationwide.

Approximately one million properties now are in some stage of foreclosure and a million more are in danger of joining them, say industry experts.

To put things in perspective, one in every 464 U.S. households received a foreclosure notice during a recent month, according to RealtyTrac Inc., a national database of foreclosure properties. And if conditions don't improve dramatically, that number will rise to one in every 33 households over the next two years, according to a report by The Pew Charitable Trust.

"What it all comes down to is if families are going to save their homes, they'll have to do it themselves," says Lloyd Segal, author of the new book, "Stop Foreclosure Now: The Complete Guide to Saving Your Home and Your Credit" (AMACOM).

There are several keys to save your home from foreclosure, according to Segal.

Move Fast To Deal With Your Lender:

Many wait until days before a foreclosure sale by their lender, at which point there's not much to be done.

"The most important thing when you fall behind on mortgage payments and you know you can't keep up, is to contact your lender," stresses Segal.

Call your lender and speak with the loan modification or foreclosure department. Speak with somebody in a position of authority.

Ask about modifying your loan. There are different types of modifications, including moving debt to the end of the loan's life or lowering your interest rate and payments temporarily until you can get back on track.

"You've already broken your promise, so be honest about your predicament: Did you lose your job, get divorced or have an illness? If you say it's only going to take a short period to get back on track with payments and it'll take longer, you're only hurting yourself," he says.

Is Your Home Worth Saving?

Determine if you have any equity in your house or an overwhelming emotional attachment to it.

"Equity" refers to the market value of your property less the balance owed on liens against it and the costs of sale. If you have equity, it is economically worth saving. Be sure you correctly value your home, taking into account any declining local property values.

If you have no equity but an emotional commitment, you still may wish to save your home. If you have no equity or emotional attachment, consider selling as an alternative to foreclosure.

Refinance Before Foreclosure Hits:

Refinancing consists of obtaining a loan from a new lender to pay your existing lender. You can do this to pay off your foreclosure lender entirely or simply bring your loan current.

If your credit is good or you have equity in your property you should be able to refinance, even if foreclosure proceedings already have begun.

After foreclosure has begun, refinancing lenders will demand higher interest rates and charge fees for the loan.

Other Ways To Stop Foreclosure:

Active military personnel and their families (and anyone who co-signed a loan with them) are protected from foreclosure, allowing for temporary suspension of collection actions. You can even get a property back if it was sold or reduce your current loan rate.

For its part, bankruptcy will put an immediate halt on foreclosure, but usually only for a temporary period. Moreover, bankruptcy will harm your credit for the future.

If the foreclosure itself is defective, you might be able to get it halted. In most cases, you will have to consult an attorney to see if the loan violated any laws or if the lender made a mistake in the foreclosure process - such as filing papers incorrectly or not giving you the required time before next steps.

For more tips, read Segal's new book, "Stop Foreclosure Now."

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