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REALTOR®: Six Steps to Avoid Foreclosure

What do to prevent foreclosure and maintain ownership of your home

Monday, August 20, 2007

The rise in California foreclosure activity due to tighter lending standards, flat or falling prices and slow sales in many areas in the state is worrisome, especially since many homeowners wait till the last minute before seeking help. In addition to these troubles, according to several studies, approximately 60 to 70 percent of Americans live paycheck to paycheck. Because many households lack an emergency savings account, they can quickly become delinquent on their mortgage when faced with a financial crisis.

Unexpected events can quickly and drastically change financial circumstances. In some states, foreclosure proceedings can begin after a borrower has missed as few as three mortgage payments.

What should you do if you find yourself staring at this gut-wrenching situation? Here are some tips from the Homeownership Preservation Foundation on how you can handle difficult financial circumstances:

1. Contact your mortgage company NOW.
The sooner you contact your mortgage company when you are going to miss a mortgage payment, the greater the chance that together, you and your mortgage company will be able to work out a solution. According to a recent Harris Interactive survey, 53 percent of homeowners would not contact their mortgage company for help with missed mortgage payments. Contrary to popular myth, mortgage companies do not want to take over your house. Foreclosure is very expensive for mortgage companies, so they would rather assist you than see you lose your home.

2. Call 888-995-HOPE.
If you don’t trust your mortgage company to help you or don’t know if they can help you, call 888-995-HOPE (or visit 995HOPE.org). This toll-free, confidential hotline is sponsored and funded by the Homeownership Preservation Foundation, a nonprofit dedicated to preventing foreclosures. Through the hotline, the foundation offers free advice and counseling to homeowners.

Homeownership Preservation Foundation counselors from HUD-certified counseling agencies can help you assess your financial situation and establish a plan to address financial issues that may help avoid foreclosure. The counselors also work with your mortgage company to facilitate a solution that hopefully will help you stay in your home. Additionally, the counselor may also know of other resources and programs, specific to your local area, which may be beneficial to your situation.

You can also meet with a counselor in person by visiting a nearby NeighborWorks America office. The Homeownership Preservation Foundation and NeighborWorks America have teamed up to offer foreclosure prevention counseling and advice through more than 240 NeighborWorks America offices throughout the country. To find your nearest office, visit www.neighborworksamerica.org.

3. Prioritize your expenses.
Prioritize your bills and pay the ones that are most necessary for the well-being of you and your family, such as shelter, food, and utilities. Then consider ways to reduce unnecessary expenses. Cut all non-essentials such as dining out, cable, health club memberships and entertainment.

Additionally, contact your credit card and utility companies and alert them to your situation. Your credit card company may be able to reduce the interest rates on your cards, and utility companies often have special programs based upon income and for families facing life-changing events.

Lastly, don’t write checks hoping that they won’t get cashed before the money is in your account. Missed payments and bounced checks could result in expensive late fees and/or dings on your credit report.

4. Protect your credit score.
Remember that making late payments or skipping them can seriously affect your credit score. Protecting your credit score is important because companies refer to it when they are evaluating your ability to qualify for loans or other financial products. A poor credit score could even affect your ability to rent an apartment or to get a particular job.

5. Beware of scams.
Beware of predatory lenders, pre-approved loan offers and phony counseling agencies. Homeowners facing financial troubles are especially vulnerable because they are desperate to find a solution to their problems. Legitimate counseling agencies will offer their programs for free or for a small administrative charge. Check with a lawyer or your mortgage company before signing anything involving your home. The U.S Department of Housing and Urban Development has more information about avoiding predatory lending on their website, www.hud.gov.

6. Do not ignore your situation.
Don’t make matters worse by ignoring your situation and hoping the problem will go away. By taking the appropriate steps now, you can guard against long-term negative effects and protect your home, your family and your credit rating. The sooner you seek help, the sooner you can get back on your feet.

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

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