Thursday, August 6, 2009

Making house payments, is it too late?

Should I continue to make House Payments?
Even though the process has started to foreclose on my home?
When you’re facing foreclosure should you continue to make house payments or not?
During this foreclosure tsunami many are asking that very question. The answer to that question is a difficult one, and depends upon your individual circumstances. The first thing I advise; is to seek the advice of an attorney. I am no lawyer and cannot give legal advice. But I can tell folks what I see happening in the real world and what I would do.
I would never tell anyone to stop making their house payments. I can, however, explain the way banks look at, and treat, pre-foreclosure situations. However, I must add, lenders are all different and all of them approach situations differently.
However, one common thread that all creditors want to achieve is the need for communication in order to resolve a matter that demands a solution. Everyone loses when the only resolution is repossession or foreclosure, except the attorneys.
I can never stress enough the importance of communication with your lender. Most folks generally expect a confrontation, therefore, they hide from collection calls and won’t communicate with their creditors. They erroneously think if they avoid the phone calls and disregard the collection letters, the situation will heal itself, but that is absolutely the opposite of what actually happens.
Paying or not paying has a lot of collateral effects and the debtor must know before making such an important decision is made. Often a creditor doesn’t know your situation, it is his job to find out what the problem might be and to rectify the situation if possible. It is essential for any debtor to talk directly to the firm that has the vested interest. They have the power and the authority to adjust, accept, or modify the payments, extra charges, penalties and fees.
The foreclosure process generally will not start unless you have missed at least three payments. By the time the foreclosure process does start, payments may be as many as five, six or even more months in arrears.
Lenders really want to work something out with you, just as bad as you want to save your home. You must know that the process of foreclosure costs a lender from forty to sixty thousand dollars to foreclose on a mortgage. This expense rises when the lender must defend their actions from a proactive homeowner. It cost time and money for the lender.
As a Realtor®, I can provide you other options, but my advice to any homeowner having difficulty making their house payments is to communicate with their lender first.
The lender has the incentive and the authority to work out a loan modification, or even forbearance of payments. You may want to discuss a short sale option with your lender and your Realtor® as well.
Although it has been said that you do not have to be in arrears with your payments prior to discussing and getting a loan modification, the practical reality is, the lender lacks much incentive to modify a loan when you are current with your payments.
Bank rules constantly change and the government intervention continues to cause the lenders to change their mode of operation. The only thing constant about bank rules and guidelines is they constantly change.
Apart from some voluntary government programs regarding government mortgages (Fannie Mae or Freddie Mac), no lender will absolutely not deal with a borrower. However, you must have a plan to be willing to negotiate and perhaps accept changes. Banks deal with all sorts of situations and they’re motivated to protect their financial interests. A typical borrower calling a lender may hear absolutes, but that is a bunch of smoke and mirrors. Lenders would rather negotiate an equitable solution than to incur additional unrecoverable cost.
Remember, nothing can happen if you don’t communicate. No solution, no remedy can be had if you do not communicate. The worst that can happen is nothing will change.
The following are things you must consider, before you decide to continue to make your mortgage payments or not.
The general rule of thumb to use is if you can pay your mortgage and maintain your current life style, you may consider keeping the loan current. But chances are you wouldn’t be asking if that were the case. But, if you need to choose between buying food, medications and other necessities of life or paying your mortgage, the decision is already clear to you and you are asking for confirmation: Your life necessities take precedent over all other things.
Your mortgage is in place to provide your family a place of shelter and security. Therefore, it should be a priority over everything else, other than food, medications and other necessities. Credit cards and other bills should be arranged into their priority before making the decision to continue to make house payments or not.
House payments or partial payments that are made after the foreclosure process has commenced will not be accepted by the lender anyway. Remember that other charges, penalties and fees are accruing exponentially during this period. In Florida and some other states, there is no right of redemption. This is to say that the homeowner has no right to buy his home out of foreclosure, once the process has started.
Here’s my advice to you: If you are in foreclosure or just a couple of payments behind, formulate a plan of action. Communicate with your lender. If you can’t work out a solution, then have a concrete plan “B” and make sure you don’t end up out on the street. Always have contingency plans and communicate with your lender. The right will answer present its self and provide you with valuable knowledge. Remember knowledge is power.

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