When your home goes into foreclosure, the lender puts an ad in the paper letting people know that your home will be auctioned off on a certain date. Suddenly you get ten notices in the mail from various lawyers and so called “nonprofit organizations” who all insist that they can help you.
These people look at the foreclosure notices in the paper every day and send out notices to everyone on the list. Be careful in dealing with any lenders or non profits who claim that they can help you.
Many agencies who claim to be non profits charge people on average $1500.00 to either work out a repayment plan or a loan modification with a lender. They claim to have special connections and to know who to call and what to do. They claim that they can get things done faster and that you need them to work anything out with your lender.
If you want to pay $1500 to have someone do that for you because you don’t have the time or you just don’t want to deal with it anymore, go for it. But personally, I think its a huge waste of money.
The lending companies know that the housing bubble has burst, the economy is bad and so many people are defaulting and having their homes foreclosed on that they are more than willing to try to work with you to save your home. If you just got behind because of a temporary problem but you are now able to make your regular payment, you may be eligible for a loan modification. A modification is when they take the back amount you owe and put it on the end of the loan. It is sort of like doing a refinance, but your payment will stay the same. Obviously your loan is going to take longer to pay off since you have the back amount at the end of it.
The other option that you can ask for is a repayment plan. If you can show that you got behind because of a problem that doesn’t exist anymore, and that you can pay the extra amount for a certain number of months, they will more than likely work with you.
The truth is that under normal circumstances, banks lose money when they foreclose. Its difficult enough to sell a home when you’re motivated to sell. When there is no one in the home to fix things up and make it look nice, the home will sell for much much less than its worth. The less equity you have in the home, the more money the bank will lose. So if you don’t have a lot of equity, it is actually to your advantage in this case.
Now that so many people are foreclosing and the housing bubble has burst, foreclosed homes are going to be a dime a dozen and I predict that banks are going to be bending over backwards to help anyone they can to keep their home.
Having said that, its not easy. A lot of national lending companies don’t have great personal service. You can expect to be told different things by different people, to be transferred between departments and to spend a lot of time on hold. If you’re willing to put in the work its easily doable. You don’t need to know anyone special or to have special connections to get a repayment plan or a modification.
If you want to do that, be sure you have available when you call how much your income is after taxes and insurance, and a rough estimate of what your monthly expenses are. Be sure that you have a good reason for why you got behind on your mortgage. They don’t want to hear “Well I really wanted a new car” Or “I just forgot to pay.” They want to hear things like “We had medical expenses, we had a baby, my husband lost his job.”
If your income has increased at all since you were having trouble paying, be sure to point that out to the person you talk to when applying for the program. Tell them how much you were making a month in the past and how much you make now.
After you talk to someone about applying for these, you will have to submit various documents such as a hardship letter, two pay stubs, and two recent bank statements.
In your hardship letter, be brief and to the point about why you got behind. Again, don’t say things like “we just couldn’t afford it”. Explain why you couldn’t afford it. Did your taxes and insurance go up? Did you have to pay to have a car fixed, did someone lose their job or have to take a cut in pay?
Be sure to find out from the person you talk to how long it will take to process your application. Be sure to let them know what your foreclosure date is if you have one. They will usually work to get you ahead of other people if you have a date coming up.
And then you have to check on them. Call them after you fax your documents to make sure they got them. Call a few days later to make sure they’re working on it. The closer your foreclosure date is, the more you need to be on them. If you can’t get a straight answer from the person you’re working with, get the number to the corporate headquarters and talk to someone there. They should be able to expedite your application to avoid the foreclosure if they know there’s a chance they can save your loan and avoid losing their money.
And above all, throughout the process, remember that you’re not alone. Be polite but assertive with the people at the lending company. Most of the people are used to dealing with people who are having financial problems and should not treat you like a criminal or like they are judging you. It is difficult to face up to our mistakes and admit that we’re having problems, but it is better to deal with it and work something out with the company than to let your home be taken away from you.
If they won’t work with you and say that you don’t have enough income to qualify for any of the programs, there are other options including bankruptcy. Be sure to do your own research about bankruptcy online before you talk to a lawyer so you’ll be armed with knowledge when you do go in to talk to someone. Just be sure that you do something instead of hiding your head in the sand if you truly want to save your home.