Do You know Help Is Available If You Are Facing Foreclosure?

Posted on February 12th, 2008 by saman

Freddy Mac and Roper Public Affairs and media have just released the results of a survey that showed that over half of the borrowers who are facing foreclosure do not know that their lenders may be able to provide them with options avoid loosing their homes. The survey also concluded that over 56% of borrowers are also unaware that free counselling services also exist to help them deal with this complex, emotional and stressful situation.

If you are facing foreclosure you should keep in contact with your lender, do not disregard their letters or phone calls. Your lender may be able to work out strategies with you that will enable you to retain your home and stop the foreclosure process but some of the options available to you and rights you may have under law are only available to you for a limited time.

Some of the options to avoid foreclosure and allow you to keep your home that you can explore with your lender are: loan modification, a repayment plan, forbearance, or reinstatement. Loan modification is reasonably self explanatory; it is where your original loan contract is legally and permanently altered for example the length of the loan may be extended to make your loan repayments more affordable.

A repayment plan is also self explanatory – you and your lender come to an agreement that you will pay your delinquent amount back in instalments added to your normal payments thus by a certain agreed upon time your arrears will be completely cleared.

Forbearance is a process by which your lender suspends your mortgage payments, or reduces your repayments for a specific period of time. This is an option to consider discussing with your lender if your financial problems are short term, for example if due to an accident or illness that prevents you from working – and you know that you will return to work on a specific date and be able to meet your commitments again after this time. Forbearance is generally combined with a repayment plan or reinstatement so that the missed payments or amount of reduction are addressed when your financial situation improves.

Reinstatement means that your lender agrees to your paying off of the entire delinquent amount by a specific date, in a single lump sum payment. Lenders often combine reinstatement with a forbearance plan if you can show that you will be in receipt of adequate funds at some point in the future. These could include such things as a settlement or other compensation payment, a tax refund or even a bonus. You must be able to prove to your lender that you will be receiving these funds. It should also be noted that there may be penalties in the form of late fees and other costs associated with undertaking a reinstatement plan.

As you can see you do have quite a few options and the assistance of a financial counsellor to help you assess the best option for you could be invaluable.