Foreclosure is a terrifying prospect, but there are steps you can take to prevent the loss. While the process can be frustrating and exhausting, you have a wide range of options open to you, so stay hopeful and willing to work against the foreclosure.
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Contact your lender directly
Lenders generally lose money in a foreclosure, so preventing your foreclosure is also in their best interest.
Todd Mark, vice president of Consumer Credit Counseling Service of Greater Dallas, says failing to contact lenders is the most common pitfall. "The earlier you talk, the more options you have," explains Mark. "By communicating early, lenders will tend to give people every opportunity to get current before facing foreclosure."
As soon as you anticipate missing a payment, contact your lender. Chances are they will work with you to avoid the foreclosure. Lenders may be willing to provide you with options, such as a mortgage modification to lower your payments. They may discuss a forbearance that suspends necessary payments for a short while. A forbearance is often accompanied by reinstatement, which allows you to pay the total owed amount in a lump sum at a later date.
You should never ignore your lenders if they contact you through mail or the phone. Lenders who receive no response may eventually file for legal action. Avoid the high costs and hassles of a legal proceeding, and stay in communication with your lender.
Reach out to a counselor
According to the Mortgage Bankers Association, 250,000 families enter into foreclosure every three months. While this may be your first possible foreclosure, counselors have helped a large number of homeowners through the process. Whether you wish to combat or complete the foreclosure, a counselor can provide you with instrumental guidance -- often at no cost to yourself.
Once you are late with a payment and suspect you may face foreclosure, contact a counselor as soon as possible. Counselors can assist you more easily if you reach out early in the process. To start searching for counselors near you, visit the Department of Housing and Urban Development's (HUD) searchable database of free counseling services. You may even wish to consult an HUD-approved counselor before calling your lender, Mark says.
You should also check out the range of government programs to assist people facing foreclosures. Different programs have been designed to help you refinance your mortgage, suspend your payments if you are unemployed or assist you with a short sale. If you are denied for one program, do not give up -- another program may be able to help. Keep trying to access every service available to you.
Organize your paperwork
Keep your paperwork at hand; this will help you stay on top of the situation. Important documents to have on hand include: monthly mortgage statements, your payment coupon book and your written loan account number. You should also prepare personal finance documents, such as pay stubs, tax forms and returns, and Social Security benefits statements. You may even wish to write a list of your household expenses, which you can complete with the help of bank and credit card statements.
Stay vigilant against scams
Scam artists have unfortunately been preying on homeowners facing foreclosure. The Federal Trade Commission warns against common hoaxes, such as phony counseling, fraudulent mortgage audits and contracts that trick you into signing away the title to your home. Steer clear of businesses that promise immediate results like stopping the foreclosure or guaranteeing a mortgage modification. Other red flags include advising you not to contact a counselor or lender and accepting payments via the Internet or wire transfer. Charging for services at all often points to fraud.
"If you are talking to someone who is charging you money for their counsel or offering guarantees," says Mark. "There is a good change you are about to be scammed." Responsible counselors do not guarantee results, and they typically offer their services for free.