One way to turn back the tide is with foreclosure avoidance counseling. For example, at findaforeclosurecounselor.org, struggling homeowners can search for HUD-approved, not-for-profit housing agencies in their area, where they can get help with loan modifications and advice on alternatives to foreclosure -- such as short sales and deeds-in-lieu.
Though a lot depends on individual circumstances -- including your income, monthly mortgage payment, and amount of time you've been delinquent -- here are some of the steps a housing counselor can take to help you save your home from foreclosure:
1. Review your financial standing
After reviewing your income, expenses, and bank statements, the housing counselor will assess whether you're financially able to own the home. Even if you get current on payments, the question is, "Can you stay in this property or not?" says Wisconsin-area certified housing counselor Lisa Arneson. "The bottom line is that if you can't afford the home, you shouldn't stay in it," Arneson says.
2. Explore your options
John Snyder, a foreclosure intervention manager at NeighborWorks America, says it's also the role of the housing counselor to explore all options available to the homeowner."Even if it's early intervention, home preservation may not be possible," he says.
In those circumstances, the most common alternative is a short sale, with the housing counselor acting as an intermediary between real estate agencies, lenders and/or originators of the loan. The housing counselor can also serve as a negotiator, for example, reaching an agreement with lenders to forgive negative equity when a homeowner is underwater in a home.
Another, less routine way to move forward is a "deed in lieu of foreclosure," in which the borrower turns over the property's deed to the lender in exchange for forgiveness of the mortgage debt. Though generally, for this transaction to be a viable route, the borrower's debt cannot exceed the fair value of the home.
3. Advise you on your hardship letter
If your housing counselor deems that you can bankroll your current mortgage through refinancing and/or minimizing expenses, then he or she will guide you in crafting a hardship letter -- a document required by your servicer or lender to receive a loan modification. You write the letter, including a explanation of why the mortgage is past due and what you are going to do to remedy the situation, and the housing counselor reviews it and makes suggestions.
"I'm not going to change any facts," Arneson says. "I'm only going to see what changes can be made to make it better."
On your behalf, a housing counselor will compile all the necessary documents (hardship letter, two months of bank statements and pay stubs, W2 forms, most recent tax returns, etc.), get them into the hands of your lender and check in with the lender on a weekly basis to confirm that the application is current.
5. Obtain final approval for the loan modification
Once the housing counselor has done the heavy lifting and made sure your application doesn't get lost in the shuffle, you're one step closer to avoiding foreclosure. But that doesn't mean you've dodged the bullet all together.
"With loan modifications, there's no guarantee," says Arneson. "They won't stop the foreclosure, but they will postpone a sales date."
Is it ever too late to talk to a housing counselor?
With foreclosures, experts stress that the earlier you start taking steps to rectify your standing with the lender, the better. If your mortgage payment is due on the first of the month and you can't pay it, that's the time to make the call for help and guidance. However, with the length of foreclosure proceedings varying from state to state (on average, in most states, it takes about a year from start to finish), housing experts say that you can still try to save your house up until the day it goes to a sheriff's sale.
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