Foreclosure Prevention Counseling

If you're having a hard time paying your monthly mortgage and need help coming up with strategies to right the ship, you may want to speak with a foreclosure prevention counselor. But not all financial counselors have your best interests at heart, so make sure you work with a HUD-approved, nonprofit agency. They can provide free advice and help you determine whether a loan modification or refinance program is available.

If a counseling agency charges a fee for advice or offers a scheme that will "rescue" you from foreclosure, it may be a scam. And if an agency tells you to send your mortgage directly to them, you need to know that this is illegal.

Working Directly with the Lender

The lender may seem like the last one you want to call if you're having trouble with your mortgage, but it's often in your best interest to do so. Lenders may make it difficult, but they generally would rather work out an arrangement that allows you to stay in your home than go into foreclosure and be stuck with another home to sell. They may offer any one of the following solutions:

• Forbearance - Lender may reduce or suspend payments for a period of time, but borrower must prove that extra funds will be available at a later time (such as a tax refund or work bonus).
• Loan Modification - This involves a rewriting of the mortgage terms (or just changes to a few of the original terms).
• Reinstatement - Often used in conjunction with a forbearance, this allows borrower to make missed payments within a given timeframe.
• Repayment Plan - Usually, this involves a negotiated amount added to the monthly mortgage in order to pay off past due balances.
• Refinance - This option is available only if you have enough equity in your home to pay off the old mortgage and other fees with the new mortgage.

Remember, time is of the essence. Contact your lender as soon as you believe you may need help with your mortgage in order to avoid foreclosure.

Bankruptcy

If all other options have been exhausted and you still can't afford your mortgage, or if your home already has been put into foreclosure, you may need to file for bankruptcy. And once you're in bankruptcy, all debt collection activities (including foreclosure) are put on hold. This grace period can sometimes give homeowners the chance to dig out from debt or negotiate with the lender. Bankruptcy only should be used as a last resort, though, since it will have long-lasting financial implications.

It can be difficult for certain struggling homeowners to avoid foreclosure, but it's usually worth the extra effort. Click on a link below for more suggestions.