FORECLOSURES ARE ON THE RISE
WHAT TO DO IF IT HAPPENS TO YOU
HOW TO AVOID FORECLOSURE
Foreclosures don’t happen overnight. In most cases, the homeowner has missed about three monthly payments and has received numerous written warnings and communications from the lender prior to commencement of foreclosure proceedings. Many of me clients have stacks of letters from their lender which have been ignored because they could not afford to make a payment. This is a mistake, if you are having trouble making your payments, even if you don’t have a dime to send them, contact your lender immediately. Most lenders have a “loss of mitigation” department that may be able to work with you to resolve the situation. Sometimes installment or “forbearance agreements” can be arranged, so that you can catch up on your mortgage over a period of time. Even if they are unwilling to arrange for forbearance, making contact with your lender and negotiating early on will help to buy some time and serve to keep you informed as to your options. If you’re loan is FHA insured, you may contact a HUD approved housing counseling agency at 800-877 – 8339. In many cases, HUD can assist you in avoiding foreclosure. In some cases, if you meet with certain qualifications, your lender may be able to work with you to obtain a one time payment from the FHA insurance fund to bring your mortgage current. Other alternatives to foreclosure include, mortgage modification, where you may be able to or extend the term of your mortgage, or a Pre –foreclosure sale, where the home is sold for less than market value, but more than what would be obtained at foreclosure. In some cases, when all else fails, a homeowner may want to consider giving a “deed in lieu of foreclosure”. In this situation the homeowner deeds, or voluntarily gives back of the property to the lender. This won’t save the house but it is better than a foreclosure where the property may be sold for less than what is owed resulting in a “deficiency judgment” for which the homeowner will be responsible for payment.
USING BANKRUPTCY TO AVOID FORECLOSURE
Bankruptcy is a very powerful tool that enables a homeowner who was behind in mortgage payments and facing foreclosure to immediately stop the foreclosure, even at the last minute when necessary. Chapter Thirteen, is the type of bankruptcy that is used in this situation. In a Chapter Thirteen, the mortgage arrears are spread out and paid monthly through a bankruptcy Trustee, over a period of three to five years. A homeowner may be eligible to file Chapter Thirteen if he or she has a regular income and can afford to make regular payments of the mortgage going forward, along with the additional monthly payments to the Bankruptcy Trustee.
WHAT NOT TO DO
Homeowners facing foreclosure are understandably under a lot of stress and may be desperate to find a solution; accordingly they need to be particularly wary of scams and individuals ready to take advantage of their vulnerability. These scams may come and the form of direct marketing through the mail, or Internet ads that promise to correct the situation and save the home, usually, for an upfront fee. Remember, if a deal sounds too good to be true, it probably is. Don’t ever send a check to anybody without first meeting them personally. Always get a written contract, but don’t, sign anything without having a thorough understanding of what you’re agreeing to. If you are not sure, have a lawyer or another professional person that you trust, review the document prior to signing.
Don’t delay! It is important to resist the temptation to procrastinate. Homeowners in these situations are often overwhelmed by their financial problems, sometimes to the point of inaction due to depression or fear. Don’t let this happen to you. In the event that you find yourself temporarily unable to meet your mortgage payments, contact your lender or an attorney specializing in Bankruptcy and Debt Management without delay. The sooner you begin to work on this problem the more likely for you will be able to resolve it.
Peter Kaplan is an attorney with offices in Salem and Lynn Massachusetts. Attorney Kaplan is a specialist in the area of Bankruptcy and Consumer Debt Management and is a member of the Mass Bar Assoc., Salem Bar Assoc., American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys. For more information or a free telephone consultation call 1-800-611-5126.