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How To Stop Foreclosure

Written by on Thursday, 28 September 2000 7:00 pm
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A growing number of home owners paying their mortgages late could become home owners faced with foreclosure -- a threat to what's likely their most valuable asset.

Nationwide, the delinquency rate for mortgages on one- to four-unit residential properties rose 10 basis points to 3.82 percent during the second quarter of 2000, according to the Mortgage Bankers Association of America .

The increase in delinquencies was the first after sixth consecutive quarterly declines and could signal more foreclosures to come on properties held by over-extended home owners.

"The fact is there are several positive options available to those facing foreclosure. Homeowners should view the foreclosure process, which lasts at least four months, as their window of opportunity to resolve financial problems and develop and implement a plan to stop the foreclosure," says attorney Lloyd M. Segal, author of "Stop Foreclosure Now in California," by Nolo.com a self-help legal information publisher on and off the Internet.

Right now foreclosures in California are down.

Lending institutions started foreclosure proceedings on 21,440 homeowners during the second quarter of this year. That was down 16.1 percent from 25,552 for the previous quarter, and down 15.6 percent from 25,407 for the second quarter a year ago, according to DataQuick Information Systems.

Nationwide, the number of foreclosures is also falling.

However, the sudden rise in delinquencies on the heels of stock market turmoil is worrisome. Many California home buyers tapped investment returns to buy homes they may not otherwise have been able to afford. Should the stock market fail to regain it's pre-Spring 2000 luster, increased delinquencies could turn into increased foreclosures in the Golden State and elsewhere.

"Many Silicon Valley residents are definitely over-extended. I pay thousands of dollars in credit card bills on a daily basis when handling refinances. With new purchases, the buyers often do not have money for the down payment and rely on gifts from relatives," said Joette Joseph, a branch manager of VP Alliance Title Co. in San Jose, CA.

Legally, lenders can begin foreclosure when you miss your first payment, but most don't begin actual proceedings until after several months of consecutively missed payments.

Sift through your original loan documents to learn what foreclosure procedure you face. Once the clock starts it's up to you to stop it before time runs out.

Two-thirds of all homeowners in default are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying the mortgage off, according to DataQuick.

Examine your options

Assuming you want to keep your home, here are some basic dos and don'ts to help you stop foreclosure.

  • First, when you are faced with foreclosure, don't go extreme. Panicking or sticking your head in the sand isn't going to make the problem disappear. Your lender isn't in the real estate business of seizing and selling homes. It would rather you pay the note.

  • Communicate with your lender -- in writing -- to establish a paper trail of evidence that you are trying to resolve the problem. Communicate with someone in authority, not the bill collector who is only after the back payments.

  • Your first strategy should be to negotiate some workout to pay the arrears and make future monthly payments. Special programs are available for those with FHA, federal VA loans and others covered by state veterans programs. Ask your lender what's available for you.

  • Consider refinancing the loan. That would both bring your loan current and pay off the lender before it forecloses.

  • If you are in the military, you have special rights under the Soldiers and Sailors Civil Relief Act to stop the foreclosure and you may be eligible for a reduction in the interest rate.

  • Procedural errors in the lender's foreclosure or lender errors when you acquired the loan could permit you to file a lawsuit to enjoin or stop the procedure.

  • If all else fails, bankruptcy is an option that can stop foreclosure, at least temporarily, and give you some leverage to resolve the foreclosure.

  • Selling the property is your other end-game option -- either selling the property out right as quickly as possible or deeding it to the lender in exchange for ending the foreclosure.

    "Stop Foreclosure Now" can help you decide when to use which option.

    Other foreclosure resources include:

  • "How To Avoid Foreclosure" offers additional details about stopping the foreclosure process.

  • The National Foundation For Credit Counseling, a network of non-profit consumer credit counseling offices offers information and assistance for those with credit and debt problems.

  • The National Consumer Law Center a consumer law clearing house for assistance with consumer law.

  • Jack Guttentag's The Mortgage Professor Web site with foreclosure information and calculators to help you determine what financial restructuring plan might work for you.
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      About the author, Broderick Perkins

    Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.
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