Help for homeowners fearing foreclosure

The idea of losing the roof over your head can be frightening. Perhaps you are facing a financial crisis and can’t make ends meet. Perhaps your mortgage carried a fixed rate for the first few years and now has gone to an adjustable rate. Whatever the situation, there are things you should know and do to prevent mortgage anxiety.

First, you need to be certain about the type of mortgage on your home. According to the Federal Trade Commission, there are three primary types of mortgages:

Fixed Rate: rate is the same for the life of the loan with changes resulting only from tax or insurance increases, if they are included.

Adjustable Rate: adjustable rates from the start; payments change over time.

Hybrid Adjustable Rate: fixed payments for a few years, then adjustable loans. For example a 2/28 loan indicates the fixed rate for two years and the adjustable rate for 28 years on a 30-year loan. Others are 3/1 or 5/1 hybrids; a fixed rate for either three or five years with adjustments every year after that.

If the adjustable rate is more than you can afford, you may be able to re-finance your loan, but often prepayment penalties apply in the first few years of that loan.

Are you behind on your payments? Contact your mortgage company as soon as possible. Mortgage companies are not ogres gleefully waiting for you to lose your home. Your loss is their loss, both in time and money.

Most mortgage companies are willing to work with you if you contact them early on. After you’ve missed three or four payments, it may be too late for a partial payment or any real help. Foreclosure proceedings will begin unless you make up all your missed payments plus late fees.

Know your income and expenses as well as the equity in your home (the market value less any mortgage balances).

Your mortgage provider needs to know what happened to put you behind in your payments as well as what you are doing to remedy the situation.

They want to know if this situation is temporary or long term; is it permanent? Are you able to get back on your payment schedule? What type of payment schedule would work for you?

If your payment problems are temporary, or you have missed only a very few payments, here are some options:

Reinstatement: you pay the entire past due amount plus late fees by a date agreed upon by you and the mortgage company.

Repayment plan: you add a portion of the past due amount to your regular payment until it is repaid.

Forbearance: your mortgage payments are reduced or suspended for a period of time; at the end of that period, payments resume and you pay a lump sum to “catch up.”

However, if your financial crisis appears to be long term, other option, although not as desirable exist:

Loan modification: lowered interest rates, extension on the term of the loan or the addition of missed payments to the loan balance. Loan modification will only be done if you can show you have reduced other expenses.

Selling your home: depending on the market, the sale may be enough to pay off your mortgage debt.

Bankruptcy: the last resort since it stays on your credit record for 10 years, making it difficult to buy another home or get credit.

In any and all dealings with you mortgage company, keep detailed notes and records, meet every deadline set for you and do not move out and rent your house. It then becomes investment property rather than a primary residence, disqualifying you from assistance from the lender.

You do not have to lose the roof over your head. There are steps you can take to prevent foreclosure on your home. Remember to contact your mortgage company early before your financial situation reaches the crisis stage.

Photo by Joyce Hollis