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How to prevent foreclosure of Home Ownership Print E-mail
Friday, 15 September 2006
It remains historically low for the 115,292 homes nationwide entering the stage of foreclosure.  The rate of increase in the number is alarming.  This could be because of the nasty mortgages IEDs (Improvised Equity Devices), high leverage and high risk loans.  Mortgage IEDs are typically ARMs, in a host of varieties that typically start off with low rates, but, in this market, continually adjust upward.

When the loans come with interest-only payment terms, if you only pay the interest and your home value shrinks, your mortgage could become larger than your home's value giving you no room to bail out without coming up with the cash to cover the difference.

"With home price appreciation continuing to decelerate and billions of dollars in adjustable rate mortgages projected to reset in the next few months, this month's increase could be the beginning of an upward shift in the foreclosures market," said James J. Saccacio, chief executive officer of RealtyTrac.

For instance, Colorado foreclosure activity spiked nearly 60 percent in August from the previous month and the state documented the nation's highest state foreclosure rate for the sixth month in a row, with one new foreclosure filing for every 301 households.

Once crawling with speculators who are now abandoning the Sunshine State, Florida saw foreclosure activity jump to its highest level of the year so far, with 16,533 properties entering some stage of foreclosure in August -- the most of any state and an increase of more than 50 percent from the previous month. The state's foreclosure rate of one new foreclosure filing for every 442 households ranked as the nation's third highest state foreclosure rate. With one new foreclosure filing for every 430 households, Nevada posted the nation's second highest state foreclosure rate for the third straight month, due largely to bad bets on housing made in and around Las Vegas. The state reported 2,016 properties entering some stage of foreclosure, a 24 percent increase from the previous month and more than three times the number reported in August 2005.

A head-in-the-sand approach will leave what's likely your No. 1 asset exposed to foreclosure. The goal should be to stop any lender action that could damage your credit and ultimately cost you your home and prevent you from owning another one in the immediate future.   Given most lenders take months before moving to foreclose, you have ample time to seek some kind of work out.

Watch out for scams. When you are down on your dollars you are most vulnerable to debt-removal come-ons. You likely didn't get in over your head over night. Don't expect a quick fix.

Once you make contact with your lender or servicer in a return call or a call you initiated, stay in touch with that contact until you are current. Document your contacts in writing so you and the lender have a documented record of your efforts.

If possible, consider restructuring or refinancing your loan -- but not to borrow more money. If you are saddled with two mortgages, do the math to determine if consolidating them will help. Likewise consolidate non-mortgage debts. In each case, determine if restructuring is your best move, preferably before you miss a payment and damage your chances of landing a new loan.

Get financial counseling. Certified (by state and federal agencies and recognized trade groups) consumer credit counseling services are often free or offered for only a nominal fee. They will teach you your rights and work with you and your creditors, say, to temporarily reduce payments or otherwise work out a payment plan that will keep you housed and your credit relatively intact.

Know your rights. If you are in the military, you have special relief under the Soldiers and Sailors Civil Relief Act to stop the foreclosure and you may be eligible for a reduction in the interest rate. Similar relief is available to those affected by hurricanes, earthquakes and other natural disasters.

If all else fails, bankruptcy is an option that can stop foreclosure, at least temporarily, and give you some leverage to resolve the foreclosure. Today's bankruptcy law also forces you into counseling.

Selling the property is another end-game option. Consider selling the property out right as quickly as possible or deeding it to the lender in exchange for ending the foreclosure and minimizing the negative comments on your credit report.

Edwina Baniqued

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