Stop Your Home's Foreclosure ... NOW

(NOTE: This info pertains to foreclosures in the U.S. only. I would be delighted to add links to Hubs that provide info for other countries. If you have any additional info, please send me an e-mail or a comment.)

(ADDITIONAL DISCLAIMER: I am neither a lawyer nor a certified housing counselor. This Hub is not a substitute for solid professional advice. Hopefully, it will help you find the right professional.)

If you feel the need to read this Hub ...

First, it's not your fault! If you've been hit with a skyrocketing payment thanks to your subprime mortgage ... or the rising cost of fuel (and everything else) has busted your budget ... or you have lost your well-paying job and the available burger-flipping jobs won't pay your bills ... if you've had the misfortune to fall ill, or must care for someone else's medical needs, and insurance won't hack it ... once again, it's not your fault! And you're terribly far from alone.

Or, maybe you have made mistakes. And, yes, some people never make financial mistakes. But in this life, everyone messes up, somewhere, sometime. We learn our lessons, and make a fresh start. And often, we come out stronger and wiser than those who have never (yet) gone through the ordeal.

And yes, it is an ordeal. But it is possible to come through it, and live well.

I know, from painful experience, that the last thing you probably want to do right now is to talk to your lender.

I also know (and learned the hard way) that it's the first thing you need to do. The lender needs to know that you are willing to work with them. And you need to have your contacts with them on record.

While losing your home to foreclosure is a disaster for you, it really doesn't do your lender many favors, either -- especially now that foreclosures are mounting up and real estate prices plummeting, which makes it much harder for lenders to recoup their costs.

When calling your lender, you may find the Collections Department will not help you. Collections has limited power to make deals; they exist only to collect. Ask for your lender's Loan Mitigations or Loss Mitigations Department. Most lenders have such departments, but may not make them easy to find.

Even here, the lender may not be willing, or feel able, to work with you. Or the officer who can make high-level decisions in your favor may prove to be unreachable -- always.

Time to call for reinforcements. Help is available.

Help is available. The sooner you get it, the better. An early start also gives you precious time to shop around if you don't get the help you need on the first try.

Homeowners Preservation Foundation (1-888-995-HOPE) is an independent nonprofit providing counseling for free. All counselors are certified by the Department of Housing and Urban Development (HUD). You can start your counseling session online or by phone 24 hours a day, 7 days a week. (NOTE: This service is sponsored by lenders. If your lender is not part of their group, they may not want to work with that lender.)

You can use this American Bar Association site to find legal foreclosure services nationwide. Choose an attorney who specializes in the problems you face and the solutions you need.

The Legal Aid Society may be able to provide legal counseling and services at low- or no-cost. To find the location nearest to you, visit the Legal Services Corporation website.

The Consumer Credit Counseling Service (CCCS) is certified by the U.S. Department of Housing and Urban Development. CCCS provides a wide variey of consumer finance and debt management services. Reasonable fees may be charged.

For dedicated do-it-yourselfers, Nolo Press provides inexpensive legal references, legal forms and kits. (WARNING: This is no substitute for professional, experienced legal advice. Proceed with caution.)

It's time to make some tough decisions. And make no mistake ... if these aren't the toughest decisions you've ever made, they'll be right up there in the Top Ten.

#1. Keep the House. For most, this is the best possible outcome. Unfortunately, there are no guarantees. Here are some possibilities. If the lender will not listen to you, they may listen to your counselor or attorney:

• Forbearance. Typically, you continue paying your regular monthly mortgage. The past-due amount is added to your remaining loan balance. The lender may also agree to forgo a few months' payments, adding that amount to your remaining loan balance.

• Payment Plan. You pay your regular monthly mortgage plus an additional amount to pay the past-due over time. Depending on your situation, this may make monthly payments impossibly high.
• Loan Adjustment or Mortgage Modification. Your lender might agree to adjust the monthly payment to a more comfortable amount.
• Bankruptcy. This will not stop foreclosure, but will delay it while giving you time to recoup and -- perhaps -- reach a satisfactory agreement with your lender. Your credit will be tarnished. If you cannot reach a mutually agreeable settlement with your lender, you may end up with both a foreclosure and a bankruptcy on your record. Professional legal assistance is a must!
  • Chapter 7 -- If you do not have a lot of equity in the home and you own few or no other assets, Chapter 7 may work for you. Most debts will simply be discharged (they go away). But if you have a lot of equity in your home, or high value in assets, you may be forced to give them up.
  • Chapter 13 -- Debts are repaid via a repayment plan. Typical (not guaranteed) outcome for a mortgage is to pay your normal mortgage payment plus a small amount to pay the past-due over a period of 5 years.

#2. Do Not Keep the House. If you simply cannot afford your house, it may be time to start over again ... as gracefully as possible. Another, truly affordable home may be yours within a few years. If your home's value has gone down so far that it is no longer an asset, you might find it desirable to walk away and rejoin the housing market when/if conditions are saner.

• Short Sale. You sell the property, generally at a loss. Your lender must approve putting your property up for short sale, because they will take the losses. You may also face tax issues after the sale.
• Deed-in-Lieu of Foreclosure. If a short sale is impossible, the lender may agree to take back the property and relieve you of all prior obligations. You can then leave and start over again, without a foreclosure on your record. Your title needs to be clear -- there should be no other liens on the property. Your property must also be left in good, sellable condition. If you owe a lot more than the house is worth, a deed-in-lieu will not help.
• Walk Away. Allow the foreclosure to proceed, and leave before law enforcement forces you out. Some folks, whose homes have plummeted in value while their payments keep on rising, have done just that. But this approach will wreck your credit.

Denial can play tricks on the best of us. So can pride. And extreme stress can drain you of motivation and energy.

But this harsh truth remains: Whether you've just realized that you can't make your next mortgage payment ... or if you've already received legal documents from your lender, you must act NOW. (But you need not act alone.)

I sincerely wish that everyone in this position -- and there are so many -- can make a successful deal and go on to a fresh start.