Foreclosures are on the rise in many areas of the country, including here in Massachusetts. Chances are that you, or someone you know maybe one or two missed mortgage payments away from losing your most valuable asset. How could this happen? It's easy to blame aggressive banks and mortgage companies for getting buyers into programs that would make our parents shudder disbelief, offering incredible deals like 100% financing and adjustable rates that sound too good to be true...until interest rates rise. It's easy to blame real estate agents, whose very livelihood depends on a big commission. The more home they can get buyers into, the more they stand to make. It's easy to blame credit consolidation schemes that suck the equity out of your home in order to pay off other debt, or the use of equity credit line purchases that rob you of your financial security. It's easy to blame naive buyers who wish for the American Dream and only want what their neighbors have, who buy everything on credit and spend their income frivolously.

The fact of the matter is that, for many homeowners, unemployment, retirement, death of a spouse or a divorce can change a family's financial picture very quickly. Those who have not been successful keeping an emergency fund available to help pay for unexpected expenses may find themselves in a desperate position.

The best way to avoid a pending foreclosure is not to let it get to that point in the first place. So, what can you do if you find yourself in financial difficulty?

First of all, take stock of what you have and what you owe. Curb all unnecessary spending, and ask for help EARLY. Contact a good financial planner in your area, one who can look at your whole picture. If you are unable to make a mortgage payment, CALL YOUR LENDER -- now! Sometimes people think that a lender might start foreclosure if they think you are in financial difficulty. This is not true. Lenders don't want a foreclosure. It costs them money. The earlier you call, the more options for loan repayment are available. The longer you wait, the fewer options you will have.

If you have received a letter from your letter reminding you of your obligation, don't ignore it. You may also be recommended for housing counseling (HUD has approved programs which you may find online at http://www.HUD.gov. Look for Massachusetts agencies, or your own state, or you can call 800-569-4287
for information on an agency located near you.)

If your situation is short-term, your lender may be able to work out a way for you to temporarily suspend payment, negotiate a lower payment, or a lump sum as of a specific date. If your problems are long-term, your lender may suggest ways to pay your current mortgage payment and catch up with the back payments by increments.

If you are reading this article and feel that you may have more house than you can now afford, consider selling it now in favor of purchasing a smaller, more modest home that fits your financial picture better. Don't feel bad about your decision to sell - circumstances change, goals change. The best way to maximize your potential savings when you sell real estate is to sell 'by owner' as there is no commission payment involved. A home sold for $400,000 through an agent could cost you $24,000. By selling it yourself, that $24,000 of salvaged equity could help to keep you on your feet financially.

Remember, lenders really don't want to foreclose and as this increases the bad debt on their books. A high amount of debt makes it difficult for the lender to write new mortgages. In a slower real estate market lenders may be more open to working with sellers who find themselves facing a foreclosure.

Should you find yourself in a situation where selling ahead of time is no longer an option and you are at least two months behind in mortgage payments, you may be able to avoid foreclosure by selling your home for an amount less than the amount necessary to pay off your mortgage loan if agreed upon by your lender. This is known as a 'short sale' or a 'pre-foreclosure sale?. There are companies who will work with lenders to structure the sale of your property that results in the homeowner having no foreclosure on record and the lender getting paid sooner than they would have had they gone through a foreclosure.

A word of caution....beware of scams.



1. Don't sign any papers you don't fully understand.

2. Make sure you get all "promises" in writing.

3. Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt.

4. Check with a lawyer or your mortgage company before entering into any deal involving your home.

5. If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state's Attorney General, or the local District Attorney's Consumer Fraud Unit for this type of information.



The bottom line (from HUD.gov):



? Don't lose your home and damage your credit history.

? Call or write your mortgage lender immediately and be honest about your financial situation.

? Stay in your home to make sure you qualify for assistance.

? Arrange an appointment with a HUD-approved housing counselor to explore your options at (800) 569-4287 or TDD (800) 877-8339.

? Cooperate with the counselor or lender trying to help you.

? Explore every alternative to keep your home.

? Beware of scams.

? Do not sign anything you don't understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.

More info on your stop foreclosure information search:

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