Avoiding Foreclosure

Avoiding Foreclosure Your house is your biggest investment, and likely one of your most sentimental possessions. In this podcast we talk about ways you can avoid foreclosure and keep your home financially stable.

Avoiding Foreclosure: Learn the ins and outs of foreclosure and how to avoid it.


Welcome to another edition of our CredAbility podcast. Along with your host Mechel Glass, here is Steve Moore to begin today’s discussion on what to do when you’re facing foreclosure. Steve: Mechel, this is an unfortunate situation for lots of people these days. Who knows how long it’s going to last? Who knows where the economy is going? But let me ask you some basic questions. What if I can’t make my payments? I don’t want to lose my home to foreclosure. Things are stressful at home. My brother-in-law has some financial advice, but I’m not quite sure about him. What should I do initially?
Mechel: What you should do in that situation is seek advice from a trusted professional who can guide you in the right direction, like a full service consumer credit counseling service. And they will provide you with information on what to do in that situation. For example, they’re going to look at everything, your budget, your mortgage. They want to know where the problems are. And they want to know how they can help by getting in touch with your lender or maybe cutting back in some other ways. So talking with a professional is really going to help you in that situation. Steve: All right, how many payments can I miss before the bank really starts calling and gets angry?
Mechel: Well, if you miss your first payment, they’re going to call. So be aware that the banks will call you. They may send you letters. And you’ve got to open those letters up and be very responsive to them. And again, it depends on different states. In Georgia, you don’t have a whole lot of time to be late on your payments before foreclosure proceedings start. If you’re in another state, it may be different. So it just depends on what state you’re in and what the timeline is. Steve: Okay, because of the economy and because of the number of foreclosures, are banks a bit more reluctant to take my home than they might have been in the past?
Mechel: Banks have a lot of homes that they have taken in the past. So they’ve got a lot of standing inventories. So they more than likely want to work with you to help you save your home from foreclosure. So that’s why it’s very important that you contact your lender if you are behind or if you think you may fall behind in your mortgage and see what options are available for you.
Steve: Now, is it possible that the lender themselves will offer some financial advice? Or do I need to find a professional to help me with that?
Mechel: The lender can help you, so call the lender. But a lot of times, Steve, people are afraid, and they don’t want to call the lender. And they don’t know if that’s going to speed up the foreclosure process. So they want to talk to someone else to make sure they’re doing the right things. And that’s where a full-service credit counseling service comes into play. Steve: All right, so it’s always better to run toward the lender rather than running away. Mechel: Absolutely. Run to the lender. Let them know what’s going on. The lenders just want to know what’s going on. Why haven’t you sent the payment in? And if you avoid them, then there’s nothing they can do except to start the foreclosure proceedings. But if you contact the lender, let them know what’s going on. Let them assess your situation. Let them help you through the process. They may have a workout option that will work to help you save your home from foreclosure. Steve: Okay. Can we chat about refinancing for a minute? I know there are lots of options out there these days. And who knows what the government is going to offer in the long run to help people. But what are the refinancing options that everyone should take a look at?
Mechel: Well, refinancing right now for home owners may be a little bit difficult because a lot of home owners may be what we’d like to say “upside-down” in their loan, meaning they owe more on the home than what it’s worth. Or if you haven’t been late on your payments and you were thinking about refinancing because the rates are so low, you may not be able to because there may have been a foreclosure in your neighborhood that has taken the appraised value of your home down. Remember when you’re going for a refinance that you’re going to have to get your house appraised. And if the value isn’t up to what you owe, you may not be able to refinance your home. So that’s why it’s important to contact your lender to see if there’s something else that they can offer you. Maybe a loan modification would work. Steve: A loan modification, what’s that?
Mechel: That’s where they change the terms of your loan, meaning they could change the interest rate of your loan, or they could extend it in case you can’t make those payments right now. Maybe you’ve lost your job, and you can’t make those full payments. They may give you something else, change the terms where you can pay a little less, but they’ll extend it on the back end so that you don’t lose your home. Steve: Sometimes people feel so stressed out because of a situation like this. I’ve heard people say, “I just want to give the house back. I just want to walk away, save my marriage, and get out from underneath this burden.” Is that possible? Can you do that?
Mechel: Well, it is possible to walk away, but we would not recommend a person to do that. Contact your lender. Let them know what’s going on. They know that there is a lot of stress that’s going on with a lot of homeowners today. So let the lender have the opportunity to help you through the process. Just walking away from the home and letting the foreclosure happen is not the right option. See what you can do. You may be able to do a short sale, where the lender will actually take less than what is actually owed on the loan. So if you walk away, you don’t have that opportunity. But if you talk to the lender and say, “I can’t make these payments,” then they’ll say, “Okay, let’s put the house up for sale.” Maybe you get an offer. And if the offer is a little less, they may take it through a short sale. Steve: What happens to my credit rating if I have to refinance or ask the bank to take a short sale or anything like that? What is this doing to me?
Mechel: If you are behind on your mortgage, then you’ve already gotten your credit hit, meaning you’ve got a 30-day late on your credit. So at this point, I would tell homeowners, “Don’t worry about your credit. We’ve got a bigger fire to put out.” Worry about the home itself, the major asset that you have and try to get rid of that house by selling it or by working through your lender, trying to get maybe a forbearance. Let’s say, if you’ve lost your job, then you can apply for a forbearance, and that’s where you don’t have to make payments for a certain amount of time until you get a replacement job. So there are so many options that are out there available for home owners. Now, you can’t pick and choose. The lender is going to offer a workout option that they will accept. So you can talk to them and say, “This is my situation,” and they will try to find a workout option that fits your situation and fits the lender’s situation. Steve: All right, now, you’ve already mentioned a couple of things I wasn’t aware of. What’s the best way for people to get a hold of you and the resources you have at CredAbility U?
Mechel: They can log on to www.credabilityu.org, and we have online courses that are available. One of the courses that talks about all the workout options that are available to homeowners is called “How do I save my home?” And consumers can take that course free of charge on our website and learn about what are the workout options and talk intelligently to their lender to see if they can save their home from foreclosure. Steve: Mechel, thanks. Mechel: Thank you.