In these times of uncertain economic progress, rising unemployment, and property values that are falling across the country (sometimes drastically depending on the region), more and more homeowners face a problem that they never before seriously considered – foreclosure. Let’s not forget the cherry on top with massive credit card debt and the need for debt relief. Most everyone in America has a mortgage these days, often more than one, and even seniors that paid off their original home loan decades ago have found themselves beset by loan officers to use their apparently limitless equity to land themselves further in debt.  After all, for as long as most homeowners had been alive, they had never known such a thing as recurrent negative equity, and even recessionary periods seem to belong to another era.  The foreclosure process seemed like something that would only happen to someone else, and too many debtors avoided looking at their equity situation until it was too late.

Unfortunately, as it turned out, oil shortages and food scarcity combined with an inevitable economic slowdown (no expansion can last forever) did halt the runaway property values, and – since predatory lenders had convinced so many to leverage their home to the hilt regardless of need or, as it turned out, traditional qualifications – many families could no longer make their mortgage payments every month and soon faced foreclosure proceedings.  Alas, all it takes is one or two thirty day lates to destroy homeowner’s credit to the extent that they can no longer re-finance: especially since so few of our countrymen still enjoy the necessary equity.

It’s a national crisis, make no mistake, and it won’t soon get any better.  Below, we’ve compiled some of the more valuable tactics and strategies that financial professionals suggest to help climb out of their financial hole and do whatever they can to avoid foreclosure.

Ignorance Is Not Bliss

It is tempting to just bury your head in the sand, avoid the phone calls and bills, and just assume that everything (somehow) will turn out all right.  To a certain extent, that is what our leaders have been doing with the American economy, and it hasn’t worked there.  Lenders will enforce foreclosure proceedings no matter how fiercely you try to avoid the situation, and, the longer that you ignore what is happening, the more difficult will be to save your home from legal actions.

Talk To Mortgage Lenders

Once it become clear that a problem exists, it should be of primary importance for borrowers to contact representatives of their mortgage lenders to explain what is wrong.  Sudden unemployment, car accidents, unforeseen illness, all sorts of financial mishaps that come about should be explained immediately to your mortgage company – even talking over a simple run of bad luck or poor household budgeting would be preferable to simply ignoring the topic.  After all, mortgage companies are not in the business of reclaiming houses.  It’s an expensive and time consuming procedure, and they would love to avoid foreclosure at all costs.  At the same time, if the homeowners do not discuss the reasons behind why they have not been paying their bills, the lenders will have no other recourse than to assume the worst.

All Mail From Mortgage Lenders Is Important

Nothing can seem quite so threatening as a bill that you cannot pay, and nothing can seem so humiliating as a past due notice announcing that fact.  For that reason, correspondence from mortgage lenders is too often avoided, shuffled aside, or even thrown away.  Ignoring mortgage lenders’ mail can have disastrous consequences, and, no matter how despairing you may be about your family finances, every borrower should maintain some knowledge of the timeline of foreclosure proceedings.  Early letters will likely contain beneficial info regarding the alternatives toward foreclosure sent in sincere hope of forestalling the worst case scenario, but, sooner or later, the lenders will have to send some notice of imminent foreclosure through legal means.  Just because you successfully avoided opening the envelopes does not mean the judge will look upon your case more kindly; if anything, the opposite is generally true.

Know Your Mortgage

Most borrowers tend to be nervous the first time they enter a mortgage broker’s office – wondering if they’ll be accepted, if they had enough money, if their credit will be good enough.  Easy enough to understand why they wouldn’t read all of the fine print about what precisely would happen should they not pay their bills on time.  First time home buyers are generally so worried about being approved that they would sign on the dotted line even if foreclosure would take their pets alongside.  At the same time, after the initial approval, borrowers radiate a certain giddiness and figure they will actually look through the documents with a fine tooth comb once they’ve settled into their new home.  And, then, as always seems to happen, life gets in the way.  In good times, when the sun is shining and the wallet is fat, it is human nature to avoid  worrying about a rainy day.  Just the same, when everything seemingly turns against the borrower, avoidance of their fates seems just as tempting.

This is all the more reason to do research before, during and after you take out a loan of any size.  You never know when accidents will happen, as they say, and it is best for every homeowner to always know what precisely will happen – in numbing detail – should they fail to meet their promised payment schedule.  Mortgages, however whimsically they may be taken out and advertised within modern times, still represent a sizable investment with potentially catastrophic effects.  These loans are to be taken deathly seriously, and their accompanying documents are to be read and virtually memorized.  Few things will seem as important once the cops have placed padlocks on your front door.

Every Mortgage Borrower Has Rights

Just as homeowners should be well versed within the niggling details of their own mortgage loan agreement, they should also maintain awareness of the various statutes protecting their rights as homeowners.  Above and beyond what is expressly promised to them through the documents signed at loan closure – also, every borrower should avail themselves of the title company expertise should something seem confusing or suspicious; this is why United States law requires an independent title company to assist with mortgage signings – there is still more information that they need to be familiar with.  Each state has their own specific guidelines and timetables as to what exactly the lenders can and cannot do in the event of foreclosure proceedings.  Contact your local state’s Government Housing Office so as to ensure that you understand precisely the available protections available.

Take Advantage Of HUD Assistance

While most government programs have been vastly curtailed in recent years, the Department Of Housing And Urban Development (primarily concerned with preparing inexpensive shelter to low income Americans) still maintains a network of trained and vigilant counselors to aid delinquent debtors in keeping their homes.  Simply go on to the HUD web site or call one of their local representatives, and they can be of surprising assistance to restoring order and preventing foreclosure.  At the very least, these counselors should be able to help borrowers with necessary budgeting so as to find potential ways to make their payments, and they will have unmatched knowledge of the various state regulations and their specific legal prevention capabilities.  Also, HUD professionals have a great deal of experience in negotiating with the lenders and convincing them that there are better ways of resolving their dispute with homeowners apart from foreclosure.

Prioritize your spending.

Within our culture, we have become so accustomed to spending whenever and however we wish that we seem to have abandoned all notions of saving or proper budgeting.  Credit is a privilege, not a right, but, within our recent national boom times, we seem to have forgotten that.  Well before the first past due notice appears in the mailbox, borrowers should already be taking every possibility to cut costs and put money in the bank.  Look at your household expenses and try to figure out just where you could easily lower costs.  Most every family these days maintains expenses that, however common they’ve become, could quickly be lost without undue hardships.  Premium cable television, for example, or lunches purchased at the office.  Many families have even decided to change vehicles since it does not appear that the price of gas will be reduced any time soon.   Along with health insurance, possibly, there should be no more significant monthly stipend than that of the house payment.  Late mortgage payments are more damaging to credit ratings and FICO scores than anything else, and, depending upon the specific lender, they may leave the debtor open to sudden and predatory foreclosure.  Even if it means foregoing utilities for the month or eating the past due charges from unsecured credit cards, mortgage payments should always remain paramount for every household.

Get Off Your Assets

Most Americans will never have an investment nearly as expensive or profitable as their own home.  Historically, it is nothing short of miraculous that ordinary working men and women should be able to find financing for a single family dwelling upon a fraction of the cost as down payment.  However, like so many things, this privilege has come to be thought of as a birthright, and, floating through the extraordinary recent economic expansion, citizens have been conditioned to believe they can simply avoid potential problems and whistle through foreclosure proceedings.  In reality, we are entering a darker period for the country – a period brought on by reckless spending and a bizarre ignorance of financial practicalities – and so a good number of homeowners shall lose their very shelter largely because they did not take the threat of foreclosure with proper seriousness.

Would you honestly rather keep a niggling stock purchase or home entertainment center rather than your home?  For that matter, almost every family maintains a second vehicle that – however necessary it might seem at the time – should not actually be a serious consideration as compared to their potential foreclosure scenario.  Even treasured family heirlooms, whether jewelry or antiques handed down through generations, should not be thought off limits if foreclosure lies in wait.  You might say that you would rather die than ask your wife to sell off her wedding ring, but would you rather ask her to be homeless?

Of course, even divesting all liquid assets and hosting a yard sale (a virtual one, ideally, since e-bay and craigslist have rather better track records) for possessions the family can live without shall not always be enough to get the mortgage payments back on line once thirty or sixty or ninety day lates have been recorded upon the borrowers’ credit reports.  The lenders also pay a certain respect to efforts of the homeowners to take out second jobs or other sources of income.  After all, we should always think of our own capacity to make money and forge equity as the greatest equity.  Fortunately, most mortgage lenders agree and reward such attempts with renewed trust (and, sometimes, restructured loan packages).

Avoid Any Company Promising To Prevent Foreclosure

Whenever there are financial hardships, it seems like there are no end of companies promising an end to their travails for virtually no effort.  Whenever something seems like a miracle, however, it probably is, and the majority of these firms are simply scavengers preying upon the very last hopes of those borrowers about to lose their homes.  The rise of the debt settlement industry, firms that negotiate with credit card companies to reduce consumers’ unsecured debts through the threat of bankruptcy or consolidation, has only helped aid the worse sort of firms defraud desperate homeowners.  However popular the debt settlement program may be – and however demonstrably successful their strategies – that sort of tactic will not find much luck with lenders holding secured loans such as mortgages upon homes.  Since the properties in question can simply be foreclosed upon with minimal legal action (which differs state to state), they have no reason to negotiate with anyone besides the lenders, their attorneys, or those government officials paid to act on the homeowners’ behalf.

Put another way, since Housing and Urban Development counselors will do a better and far more efficient job for free, why on earth should any homeowner find it necessary to pay charges for a third party outfit?  Debtors should not pay out additional fees for problems that, at base, are the result of an absence of money.  We understand how tempting these sort of services may be.  Some smooth talking so-called professional promising to make everything okay would be what most homeowners crave during such times, but that is exactly why they manage to con ordinarily suspicious and reasonable Americans into their web of deceit.  Even those few businesses that are not seeking to defraud lenders out of their limited incomes will still charge an arm and a leg for services that HUD professionals offer for free with similar results.  No need to pay out a few months’ mortgages payments for something you (or your government) can do without any charge at all.

Do Not Stop Foreclosure By Trading Away Your House

Much as the predatory abuse of supposed foreclosure prevention firms can lead borrowers toward false hopes and tempt them to spend their money on pointless quick fix-it solutions while ignoring what their funds should actually be helping to right.  It is an unfortunate consequence of public dissatisfaction with their government and their fear of attorneys’ fees (neither of which should seem unreasonable) that results in this mistaken trust of uncertified salesmen.   Regardless of cause, the fear of foreclosure still allows these unscrupulous criminals to force borrowers to sign away the title of their house while assuming they are actually helping themselves.  Some borrowers sign away their rights without ever having the appropriate document analyzed purely on the basis of feeling comfortable with the person holding the pen.  More than that, if the paperwork is sufficiently clever, the borrowers might end up paying mortgage payments as rent without their knowledge.

Never, no matter what is being promised, no matter the time pressure being imposed, never sign anything without advice from Housing and Urban Development professionals or the lawyers and realtors you have successfully worked with before.  There’s almost nothing more important than a family’s home, and you should make sure whomever has been trusted with safeguarding that home shall do everything in their power to maintain it.

Cole Collins

Cole Collins

Cole Collins: I am a free lance writer concentrating on various personal finance related topics. Google me and you’ll see a lot of my stuff