With mortgage interest rates poised to rise, the U.S. economy teetering between expansion and uncertainty, and American consumer debt still raging, many U.S. homeowners risk foreclosure on their home ? but they don?t have to lose their slice of the American dream, says Andrew Housser, co-CEO of Freedom Financial Network.
According to the Mortgage Bankers Association of America, 4 percent of mortgages are in delinquency in early 2005. With $9 trillion in outstanding U.S. mortgage debt, that places $360 billion at risk of foreclosure.
?Homeowners can make choices ? ideally, before they purchase a home, but even after problems arise ? that will allow them to keep a home or at least minimize the damage a foreclosure could have on their futures,? said Housser, whose company provides debt resolution services for people in serious debt hardship, particularly those who incurred debt because of divorce, job loss, medical problems or other traumatic events.
In many states, foreclosure rates have increased recently (Source: RealtyTrac.com). Housser believes the increase stems from consumers incurring too much debt ? a national total of $2.1 trillion in revolving debt, plus more than $9 trillion in mortgage debt, according to the Federal Reserve. Here, Housser provides tips for preventing and avoiding foreclosure.
1. Create a budget and don?t stretch yourself too far. The unexpected can and does happen to millions of Americans each year. ?For people who live at the far edge of their means, one life event can hijack their lives and lead to defaults on bills and/or mortgage payments,? Housser says. The key is to build a detailed budget of income and expenses, making sure to have some breathing room to weather an unexpected downturn.
2. Be careful with adjustable rate mortgages (ARMs) or interest-only loans. These types of loans let borrowers qualify for more expensive homes ? but beware as rates (and payments) climb. ?If you can barely afford the payment on your ARM or the interest-only mortgage, you are asking for trouble in a few years,? Housser says. ?Give yourself even more budget space with these loans.?
3. Don?t jump to refinance your home to pay off credit card debt. Many people faced with large unsecured debts that they are unable to pay consider refinancing their home to pay down their credit cards. The problem is that this strategy only moves the debt ? and puts your home at risk of foreclosure if you are unable to pay. If you are not confident that you can keep up with the higher payments on your home loan going forward, consider debt resolution or another debt relief option.
If foreclosure is already on its way, homeowners still have several options, Housser says:
1. Enter into a forbearance agreement. For a temporary hardship, lenders might grant a forbearance agreement to lower ? or eliminate ? payments for a limited time.
2. Consider loan modification. A loan modification seeks a permanent change to the loan, such as lowering the payment and extending the loan?s term, or incorporating delinquent back payments (if any) into future payments.
3. Obtain a ?deed in lieu? of foreclosure. A ?deed in lieu? essentially allows the borrower to return the title or deed of the property ? giving the home back ? to the mortgage holder to avoid foreclosure.
4. Sell the home. Selling your home may not be ideal, but it is a way to avoid foreclosure proceedings on your house and pay back your lender.
5. Refinance the loan. It may be possible to refinance your mortgage for a lower interest rate and/or lower monthly payment (this is much different than refinancing to take cash out to pay off credit cards). However, if you already have had late payments on your mortgage, the interest rate offered to you may be too high to lower your monthly payment.
?A reputable foreclosure assistance organization, such as a debt resolution firm, can help with these options,? Housser advises. ?Check with the Better Business Bureau to make sure your chosen company is on the up-and-up.?
Housser suggests that people facing foreclosure be wary of so-called equity skimmers. ?If your house is facing foreclosure, you will probably receive solicitations from several people who are looking to ?help? you prevent foreclosure by offering to sell your home for you or by taking ownership of your home,? Housser cautions. ?In most cases, these solicitations are scams trying to take advantage of people in difficult situations. The perpetrators are trying to take the equity you have built up in your home right out from under you.?
Freedom Financial Network, LLC
(www.freedomfinancialnetwork.com) provides consumer debt resolution services through its Freedom Debt Relief, Freedom Foreclosure Relief and Freedom Tax Relief divisions. Working directly for the consumer, the company negotiates directly with creditors, and offers an alternative to bankruptcy, credit counseling, and debt consolidation. Based in San Mateo, Calif., Freedom Financial Network serves more than 3,000 clients nationwide and manages more than $100 million in consumer debt.
Editors Note: Housser is available for interviews on subjects pertaining to foreclosure and consumer debt. Contact Aimee Bennett, Fagan Business Communications, 303-843-9840, e-mail protected from spam bots.
