The Hook, 1/24/2008

GIMME SHELTER- Fearing foreclosure: How can I avoid losing my house?

published January 24, 2008

Jason Crigler
Crown Mortgage Services

Q: Lately, I've been having trouble making my mortgage payments, and my lender keeps calling me. One of the houses in my neighborhood was foreclosed recently, and I'm worried the same thing could happen to me. How can I avoid a foreclosure? If I can't, how would one affect me as a buyer in the future?

A: Real estate foreclosure occurs when a borrower is unable to meet the obligations of a loan, and the lender claims and sells the property used to secure the mortgage. The most important thing to do if you believe you may not be able to make your monthly payments and are falling behind is to be proactive about the problem.

First of all, do not avoid calls from you lender. With such a large and important asset as your home at stake, it is essential that you face the lender and work together to find a solution.

When you do call your lender, you may hit a brick wall and get sent directly to the collections office. If you can break through this department and actually speak with someone who makes decisions, however, perhaps you and you lender can come up with a solution that will mutually benefit both parties.

If your lender is unable to help, there are also several local and national organizations that specialize in credit counseling services. If for some reason you are unable to contact your lender or do not have the time to work with them, you should contact an approved HUD counselor or real estate lawyer.

Typically, foreclosure is a last resort, and lenders wish to avoid it as much as homeowners. In fact, a foreclosure costs lenders and investors an average of $58,000 per home, according to the Homeownership Preservation Foundation. Lenders often go through several steps before considering foreclosure.

If you do suffer a foreclosure on your home, it will have an extremely negative impact on your credit report. Today, credit scoring has become an integral part of the lending process, and a bad credit score often diminishes your chances of securing a loan or mortgage in the future.

Fortunately, a foreclosure does not remain on your credit report forever; it often falls off the report in about seven years. As you re-establish good credit through a record of timely payments and responsible borrowing, it may even be possible to own your own home again one day.

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