ADVICE ON BEING FORECLOSED

You, or others you know (friends, relatives, co-workers) might be faced with the prospect of losing their homes through foreclosure. It’s a devastating situation, not only financially but emotionally, and the ripple effects can be felt for years. There is some action you can take to protect yourself. Heed! Please don’t be embarrassed to tell anyone you know who’s in such a plight to take defensive steps IMMEDIATELY. (Hopefully it’s not too late.) Post this on your bulletin board at work….email it to your cyber-correspondents….however you do it, get the word out that there are steps to take to minimize, if not altogether avoid, the shock of foreclosure. FIRST---This step is tricky but absolutely necessary. Sad fact of life: When people are in a financial jam, the LAST thing they want to do is go face-to-face with the lender. In reality, the FIRST thing they should do is pay a visit to the lender to plead your case. NOT by letter. Not by telephone. NOT by email. IN PERSON. When a loan starts turning delinquent---and lenders can spot these a mile away, ---the lender assumes that the borrower is intentionally avoiding making the payments promptly UNLESS the borrower makes a sincere attempt to explain the situation. And the best, if not only way to show that sincerity is by a personal visit to the lender. Your visit will be most productive if, in the months preceding, you have A) responded promptly to any and all attempts by the lender to contact you, by mail, phone or otherwise; B) given timely notice to the lender that your next payment might be late. These simple tasks help establish your credibility and your intent to do the right thing. BE PREPARED. BE VERY PREPARED How should you prepare yourself for a personal visit? Draw up a list of all your current income and your current debts, including the payments you’re making and the interest rate you’re paying. If there have been ANY circumstances that have caused your payments to become late, bring in whatever proof you have of 1) medical problems in the family; 2) salary cutbacks or job termination; 3) demands from other creditors---including the IRS---that threaten imminent debt collection procedures; 4) evidence of unexpected and necessary expenses you’ve had to make, such as costly home or car repairs. And so on. Yes, the lender might take your word for all of this. But remember, you’re there because you have not kept your contractual word regarding your monthly payments, so the lender might need more convincing, such as the above evidence. What can you expect from the lender if your story is credible? Lenders do NOT want loans to become delinquent. It’s not just a matter of them losing money. It’s a royal pain, and a costly pain, to handle delinquencies---extra paperwork, extra surveillance of your account, extra notification to credit bureaus, extra time listening to excuses, extra anxiety when you yet again fail to keep a promise to pay. Here are the main things a lender can do for you. If these options aren’t offered, ask about them. YOU DON'T ASK, YOU DON'T GET (ROSEFSKY 'S RULE 378b) ---Determine if you are in the small percentage of home owners who qualify for help from the plan announced in early December designed to aid certain home loan debtors. The government played a small role in this program, but any help must come voluntarily from the lenders. If you do qualify, take whatever advantage works best for you. ---Your payment date can be delayed to give you some breathing room each month, maybe enough to get you back on track within an agreeable time frame. You might score some important points in this regards if you seek the lender’s advice on how to better budget your family finances. ---Late charges can be waived, at least for a short time. This won’t get you off the hook entirely, but it can give you some breathing room. ---Discuss refinance options. You might be able to write a new loan for the same amount you now owe, but with a lower payment schedule. You might be able to write a new loan that will provide you with extra money you can use to pay off other more costly debts, such as high interest rate credit cards or other IOUs that are tacking on late charges and threatening legal action. This is where the tricky part comes into play. Very likely, the lender you originally dealt with in getting the loan no longer holds your IOU. They may have sold it to an investment group, which in turn packaged your loans with other loans and securities, and then sold chunks of that package to mutual fund companies, who in turn peddled shares in the mutual fund to any and all takers. Your IOU changed hands every step of the way. You must determine who in that chain has the authority to modify the terms of the original loan, and deal with them as best you can. Ultimately, you must convince whoever has the authority to modify the loan that a refi will put control of the loan back in his (and your) hands. If there’s a prepayment penalty in the original loan that would kick in on a refi, you’ll have to try to negotiate around that. OTHER WAYS TO STAVE OFF DISASTER : ---Explore what the lender will do for you if you can add a co-signer to your loan, or if you can provide some good collateral in addition to your house. Doing either of these things might win you a short hiatus from making payments, after which you’ll have to catch up and stay caught up. ---Contact non-profit agencies that might be able to help: HUD (the federal office of Housing and Urban Development). 1-800-569-4287, or online at http://www.fha.gov/. ; Association of Community Organizations for Reform Now (ACORN) at http://www.acorn.org/ (888-409-3557); Homeownership Preservation Foundation (HOPE) at http://www.955.org/, 888-955-HOPE. DON'T SAY WE DIDN'T WARN YOU LAST BUT NOT LEAST: WATCH OUT FOR SCAM ARTISTS WHO WILL PROMISE TO CHASE AWAY THE FORECLOSURE WOLVES. SNAKE OIL SAM HAS A FIELD DAY WITH POTENTIAL FORECLOSURE VICTIMS. HE CAN CONVINCE YOU TO PAY HEFTY FEES IN ADVANCE TO SOLVE THE PROBLEM, AND YOU CAN BID THAT MONEY FAREWELL. HE CAN MANIPULATE YOUR MIND SO THAT YOU UNWITTINGLY SIGN PAPERS TO STAVE OFF FORECLOSURE, BUT INSTEAD GIVE HIM TITLE TO YOUR HOUSE. MANY SO-CALLED LOAN CONSOLIDATORS ARE REALLY SNAKE OIL SAMS IN SHEEP’S CLOTHING---CHECK WITH YOUR LENDER AS TO THE RELIABILITY OF LOCAL LOAN CONSOLIDATORS. This article supplements Chapter12, pages 320-326 in Personal Finance. Access the textbook by clicking on the box in the right column.