Foreclosure options for those with mortgage trouble

Contact your lender about problems in order to avoid foreclosure

The red-hot housing market has cooled off. Prices that were rising almost daily have stabilized and in some markets they have even begun to drop. At the same time, interest rates for mortgages have been steadily rising for the last two years. The combination of stable or falling prices and rising interest rates has created a bit of a problem in the lending industry - an increase in the number of foreclosures.

Foreclosures are not exactly rare; it is estimated that there will be three quarters of a million of them in the United States this year. A foreclosure is the process by which a lender takes back a property from a buyer who cannot make payments on it. It is generally a lender’s last resort; they usually don’t want to take back property unless it becomes absolutely necessary. After all, lenders are in the business of lending money, not in dealing with tangible assets like houses.

Still, it sometimes becomes necessary to take a house back. In many cases, it could be avoided simply through communication and negotiation with the homeowners. But many homeowners are afraid to call their lenders to discuss their problems. That’s unfortunate, since a simple phone call could probably go a long way towards resolving the problem. By all means, if you are having a problem making your loan payment every month, call your lender and tell them about it. You should do this whether the problem is temporary or one that is expected to be long term. Either way, your lender may be able to help. And help from your lender is far better than the mortgage help offered by advertisers on telephone poles.

Here are some possible solutions that your lender may be able to provide:

• Modify your mortgage - It’s possible to rearrange your mortgage agreement to change the terms or interest rate. Your lender could reconstruct your mortgage in a way that adds your missed payments to your balance. 
• Your lender could agree to permit you to miss payments for a short period of time. Repayment of the missed payments could be negotiated separately.
• Your lender could accept the house back instead of foreclosing and throwing you out. This is known as a “deed in lieu of foreclosure.” The lender would take the property in exchange for letting you walk away from your obligations. This solution is not all that common; most lenders would rather have money than your house.

Each borrower will have his or her own personal problems and each lender will have their own way of handling such problems. The only way to find out what, if any, options you may have with your lender would be to call them, tell them about your problem and see what sort of solutions they can offer. As a rule, lenders do not want to throw people out of their houses. It’s expensive and time consuming, and they would rather not do it if they can avoid it. If you have a mortgage problem, give your lender a call and see if they can help you.