How Can I Prevent or Stop Foreclosure?

Foreclosure. The word alone conjures up ideations of dread and embarrassment. In this current financial crisis, however, it seems that there are none who are impervious to this unnerving new trend. In New York, for example, there was a reported 27.4% increase in Nassau County foreclosure filings just from the second quarter to the third, according to RealtyTrac, a foreclosed properties marketer. As a result of this, there are now a great many homes on Long Island that lay vacant, slowly slipping into various states of disrepair. Ten years ago the thought of vast numbers of foreclosures in one of America’s most desirable areas would have been considered nonsense. Nevertheless, Nassau County residents are no different in that they are feeling the strain of a national housing market gone haywire.

What is it that is causing all of these foreclosures, anyway? Well, the press has been fairly consistent and accurate in reporting that increases in Adjustable Rate Mortgages (ARM’s) and defaults on subprime home loans (which are already risky anyway) led to the current deluge of foreclosures. But if you dig deeper into the issue, you will see another major problem: homeowners were simply walking away from their property.

The real trouble started when the unprecedented housing boom began to collapse inward. Homes lost value so quickly that thousands of owners were left with a mortgage that was much greater than what the home was actually worth. For many, the solution has been foreclosure. However, there are a number of options available to homeowners who are facing a possible foreclosure. As with any situation of this magnitude, consulting with an expert such as a foreclosure attorney will provide you with valuable professional insight. If you find yourself in danger of foreclosure, consider the following:

In July of this year, President Bush signed into law the Hope for Homeowners Act. Under this act, homeowners can petition the federal government to buy their mortgage from their original lender with far more favorable terms. Likewise, a homeowner can refinance their current mortgage if they have sufficient equity, and possibly obtain a lower rate and payment. Other debts can be paid off when refinancing, so balances at high rates of interest like credit cards can be converted into the low-rate refinance. While either of these options can serve to enable a homeowner to avoid foreclosure, the fact remains that if the homeowner still cannot afford the monthly payment, then they are financially doomed unless they seek assistance and act quickly- there are still options available for even the most difficult financial situations.

In a case where the minimum monthly payment cannot be met, and the mortgage cannot be refinanced, selling the home may be a good option, especially if it can be sold at a profit. However, if a sale is not possible or even likely, a homeowner can offer a Deed in Lieu of Foreclosure. This is where the owner “sells” the home back to the lender. Any difference between what the mortgage is worth and what the home is sold for is forgiven by the lender. As an example, if the mortgage carries a balance of $100,000, but the home is only valued at or sold for $80,000, then the bank will forgive the $20,000 dollar difference. Because there are special rules to a Deed in Lieu of Foreclosure- such as the possibility that the forgiven balance may be considered taxable income- it is crucial to seek the advice of an experienced foreclosure attorney. Lenders agree to Deeds in Lieu of Foreclosure regularly, as this is a way to be rid of particularly risky loans that will cost more to collect on than to simply take as a small loss, comparatively speaking. But again, there are rules that must be adhered to, and you cannot possibly know them all yourself.

One way to buy time against a looming foreclosure is to ask for a forbearance or grace period on payment. When a homeowner is honest with a creditor, and advises them of financial difficulties, the lender is very likely to make concessions. Contrary to popular belief, it is in the best interest of the lender that your home not go into foreclosure. Mortgage companies grant payment “holidays”, forbearances, extended grace periods, and adjustments to existing mortgages to better enable a homeowner to avoid foreclosure. They do this constantly, so use it to your advantage.

Many people do not know that there may be public assistance available. Churches, State and Federal programs, charity organizations, and other forms of public assistance may help with anything from actually paying the mortgage payment to arranging for an attorney.

This entry was posted on Wednesday, February 4th, 2009 at 7:21 am and is filed under Long Island Foreclosure Firm, Nassau & Suffolk County, Nassau & Suffolk County Real Estate, Stop & Prevent Foreclosure. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.