Another day of bad news for home owners has occurred. The real problem in my mind is the adjustable rate mortgages so many people obtained. These loans are popular when the rates are low, but even without the subprime fallout, these loans have ever increasing payments when the initial terms lapse.
If you find yourself unable to pay your mortgage payment, we may find yourself in the foreclosure process. However, foreclosure usually does not start with one missed payment (this may be changing in today’s environment though). Foreclosure is a process which takes several months; the term of the process is different from state to state, but three months is typical. Considering that this is not an immediate event, you should take action once you receive your first notice.
Step 1: Do not ignore notices. In fact, contact your lender before they send a notice. This can be risky, because you are letting them know of a situation where they may not be sympathetic, but you should control the circumstances.
Step 2: Contact a housing counseling agency associated with HUD. To find the closest agency, call (800) 569-4287. Be wary of phony counseling agencies, since they may be after a fee from you while offering no help. A HUD approved agency is your best resource during foreclosure.
Step 3: Discuss options with the lender. They may be willing to arrange a lower payment for a time (special forebearance), to arrange a new type of mortgage like a fixed rate mortgage, or some type of FHA payment. Your last two options would be selling the property before foreclosure (but selling your property can take three to five months), or signing over the house to the lender (which is a last resort). Maybe you should consider a lender you could trust, or who could at least offer you refinancing.
Step 4: Be careful of people approaching you during this period with offers of help or of purchasing your home. Who knows how scam artists will find you, so you will not be able to avoid them, but do not listen to them. Only deal with firms or agencies you have contacted. There is no easy out of this situation, so do not be tempted.
Step 5: Since you are being proactive, make sure you understand what the lender is arranging. Understand the papers you are signing, and that those papers state everything that you understand that you are agreeing to. Make sure that any agreement releases you from any liability with the loan. Having a lawyer or the counseling agency go over any deal worked out, so you can know that your interests have been served.
Remember, not do anything, or not seeking out all of your options could cost you your home and good credit.