Nationwide, home foreclosures are increasing at, what many economists and financial
experts suggest is, an alarming rate.
Depending on who you ask, reports list between 14 percent to 33 percent more homes
in foreclosure in April 2006 compared to April 2005. Especially disturbing, the
increase includes all income levels and all home/property values.
One out of every sixty-nine homes in Indianapolis is in foreclosure, giving that
city the dubious honor of first place in the foreclosure trend. Atlanta, Dallas,
Memphis and Denver round out the top five slots at one in seventy, one in ninety-nine,
one in a hundred-and-one, and one in a hundred-and-five, respectively.
Why?
The number one rule:
Do not avoid your
mortgage company.
There are many reasons that homeowners may find themselves in trouble. Poor health,
job loss or drops in income, unanticipated increase in expenses like winter heating
fuel, gasoline, education or sudden costs such as roof or furnace repairs are some
commonly mentioned reasons for financial problems.
Experts in the industry suggest a big part of the problem is the result of the popular
variable rate loans and rising interest rates, overvalued homes, increased household
expenses, and stagnating wages.
Unlike the more traditional 15 or 30-year fixed rate mortgage, with a variable or
adjustable rate mortgage (ARM) when interest rates dropped, extremely low mortgage
interest rates were offered. Now with interest rates on the rise, the interest rate
on the ARM loan ‘re-sets’ and as a result the monthly mortgage payment
climbs higher. As ARMs account for approximately a quarter of all outstanding mortgages,
and many of these loans are due to re-set within the next couple of years some homeowners
may be surprised to find their monthly house payment will increase- potentially
growing to double what they currently pay.
With housing sales slowing, the once quick sale to make money or get-out-from-under
may not occur in time to help those in trouble.
If your mortgage payment starts rising and you are in a debt management plan with
Credit Advisors contact us immediately.
Michaela Harper, CAF Program Director recommends vigilance, “Maintaining a
successful DMP can be difficult in the best circumstances and requires special attention
if you have an ARM. I would recommend you keep in close contact with our certified
credit counselors so that you can stay on top of any changes that may need to be
made to your current action plan.”
Harper also counsels homeowners to make every effort to pay the mortgage and contact
CA for further assistance.
“My experience is that most people want to meet all of their obligations but
in a budgetary crises situation it is important to make sure your priorities are
clear,” Harper said. “It’s tempting to ‘do something even
if it’s wrong’. For example, people will realize they don’t have
enough to pay a full mortgage payment so they’ll pay down credit card balances
to feel they are taking some sort of action. Keeping priorities straight means whenever
possible focus on maintaining your homeownership status.”
The number one rule, according to Harper, during financial difficulties is: Do not
avoid the mortgage company.
“If you’re having difficulty, they have a vested interest in helping
you resolve the situation. The mortgage company does not want to own your house,”
reassures Harper.
“They want to earn the interest from your payments. The sooner you contact
them the sooner you can find out what programs they have available to help you and
a quick resolution will save your relationship with the mortgage company and your
rating with the credit bureau.”
More intense negotiations may need to be completed by a certified credit counselor.
Selling or refinancing your house may have been easier in the last few years due
to the swiftly moving housing market but these are still options worth considering
if you are in an especially difficult situation. Other options may include special
forbearance, partial claim, or deed-in-lieu of foreclosure - be sure to ask your
lender about these options.
Focus on maintaining your
homeownership status.
Finally, beware of scams. Yes, there are people out there who would attempt to take
advantage of you during this difficult time. The old rule still applies: if it sounds
too good to be true, it usually is.
The U.S. Department of Housing and Urban Development adds these important points:
- Don’t lose your home and damage your credit history if you can help it
- Call or write to your mortgage lender immediately
- Stay in your home to make sure you qualify for assistance
- Arrange an appointment with a housing counselor
- Cooperate with the counselor or lender trying to help you
- Explore every alternative to losing your home
- Beware of scams
- Do not sign anything you don’t understand
- Make sure you get all ‘promises’ in writing
- Beware of any loan assumption (or signing over the deed to someone else) where you
are not formally released from liability for your mortgage debt
Act now. Delaying can’t help. If you do nothing, YOU WILL LOSE YOUR HOME and
your good credit.