Foreclosure Facts: Bad loans, bad economy

A growing number of homeowners across the United States have lost their home or been threatened with foreclosure since the housing market started its steep slide in 2006. Many of them fell behind because they had bought sub-prime mortgages that grew evermore costly; others suffered when the economy as a whole turned sour and they lost a job. Lenders in turn saw their resources dry up and began imposing harsh restrictions on loans.

Video: The Bailout Confusion

Effects of the bailout

A huge bailout plan for the U.S. economy has been passed by Congress. Part of the money has gone to saving banks that otherwise would have failed. The goal was to protect consumers’ investments and stimulate new lending. Additional plans to inject money into the economy are still in the works. If and when these funds will encourage lenders to loosen loan restrictions and help homeowners avoid foreclosure is uncertain. Nevertheless, as conditions for you, the banks and the economy continue to change, it’s wise to start developing a plan of action that will help keep your home safe.

Your mortgage rights

As a first step, locate and read all your mortgage documents so that you fully understand what your lender can do if you fall behind in payments. Learn about foreclosure law in your locale by contacting your state’s government housing office. Also contact the U.S. Department of Housing and Urban Development (HUD), which funds free or low-cost counseling.

Video: Foreclosure Help Runaround

The options available

If you are unable to pay your most recent mortgage bill, contact your lender immediately. He or she may be able to offer you some options, including these:

• Mortgage modification: If you can make some form of payment but are unable to bring your account up to date, your lender may agree to change the terms of your original loan to reduce the size of your payments. It’s possible that your lender would approve
• Adding missed payments to the current loan balance.
• Converting an adjustable-rate loan to a fixed-rate loan.
• Extending by several years the length of time you will have to repay the loan.
• Partial claim: If you have an insured mortgage, your lender might assist you in obtaining a one-time, interest-free loan from the mortgage insurer.

HOPE for Homeowners

This program, administered by the United States Federal Housing Authority (FHA), went into effect in October 2008. It helps fend off foreclosures by moving at-risk homeowners into stable, 30-year, fixed-rate mortgages. Once your application has been approved, the HOPE for Homeowners mortgage plan will replace your old mortgage. You won’t owe payments on the previous one.

Other steps to take

If you’re feeling pinched by debt and worry about foreclosure, take action now.

• Review your finances, create a budget and try to reduce all unnecessary spending. Delay making payments on unsecured debt (credit cards, for example) until you can fulfill your mortgage obligations.
• Use your assets. Is there a second car, household property in storage or an annuity (a whole-life insurance policy, perhaps) that you could sell to raise some cash? This might seem severe, but it could keep you from losing your home.

Although these efforts might not be enough to prevent foreclosure, they could demonstrate to your lender that you’re willing to make big sacrifices.

Get professional help

Foreclosure is such a disruptive event that you could find yourself overwhelmed just thinking about it. Don’t wait too long to find professional help. Many attorneys, including those listed below, specialize in helping homeowners deal with the prospect of foreclosure.

Foreclosure attorneys near you:

Chad Cos
Baltimore, MD
(866) 775-6367

Richard Gottlieb
Boston, MA
(866) 305-7236

Joel A. Schechter
Chicago, IL
(866) 741-4554

Walter Mezten
Detroit, MI
(888) DEBTGONE

Neil Crane
Hartford, CT
(866) 745-6192

Richard Baum
Los Angeles, CA
(866) 639-3418

Richard Steadman
N. Charleston, SC
(866) 614-3163

Stacy Mogul
Philadelphia, PA
(866) 626-3073

Wendy Duchene
Pittsburgh, PA
(866) 639-3416

Leavengood & Nash
Tampa, FL
(813) 221-3328