Work With Lenders to Prevent Foreclosure

By Mark Davis
The Kansas City Star

Homeowners having trouble making the house payment have lots of company, and they have lots of ways to save their homes.

The best way is to call their mortgage companies - and call as soon as a problem seems at hand.

"The bank would much rather work out a deal with the homeowner than an investor or another buyer," said Jeremy Brandt, who runs two homebuyer companies. "The bank is your best friend in this situation, because the bank doesn't want to own your house."

Lenders say they can lose as much as a third of a loan's value in a foreclosure. They lose much less money by reworking loans so homeowners can meet their payments.

Housing counselors echo Brandt's advice.

They also offer to help an owner prepare for that call to the lender. They will go over budgets to help find ways to make payments or show the lender that it needs to help.

Specifically, a lender can agree to delay payments or modify a loan to make payments manageable.

A lender also may be willing to simply take back a house without foreclosure, which does less damage to the owner's credit history.

Housing counselors urge homeowners to call as soon as they learn they might not make their next payment.

"Then the lenders are cooperative and sympathetic to a solution," Clarke said.

Owners, unfortunately, wrongly think lenders will be quicker to foreclose if they know the borrowers are having trouble. Clarke said he wanted to change that thinking.

"Homeowners don't realize the lender is not their enemy," Clarke said.

Fast action saves homes
Housing counselors strongly urge homeowners to call their lenders as soon as they know they'll miss a payment. Here's what the lenders can do:

*Forbearance - Delays payments a short time to work out a plan to get current.

*Reinstatement - If you're already behind but can promise a catch-up payment by a specific date.

*Repayment plan - Payments already past due can be tacked onto future payments if an owner can now make payments.

*Modify mortgage - Extend the length of the home loan to reduce monthly payments.

*Time to sell - If you can't catch up, the lender may forestall foreclosure while you try to sell the house.

*Accept property back - The lender may allow the owner to hand over the property and forgive unpaid debt. This will damage owner's credit record, but less than a foreclosure would.