From: The Sacramento Bee

The S&P/Case-Shiller Home Price Indices measure the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. The latest Index reveals an apparent softening of demand in October, which translated into weak home price growth across the 20 markets that the index tracks.

Even before the release of this latest index, Mark Zandi, the chief economist for Moody’s Economy.com forecast that U.S. homeowners should expect another wave of mortgage foreclosures by the third quarter of 2010.  His troubling estimate is that “7.5 million foreclosure sales will have taken place between 2006 and 2011. The majority of these sales, however, have not emerged yet, with 4.8 million foreclosure sales expected between 2009 and 2011.”

Zandi also concludes that a significant obstacle to a housing recovery is the number of mortgages that are “underwater.”  Underwater mortgages occur where borrowers owe more on a loan than a home is worth. Zandi said about 25 percent of single-family homes with mortgages have negative equity.

If you are falling behind on your mortgage, you must carefully assess your situation and understand your rights.  All too often, homeowners ignore their money problems because of a misguided belief that banks will immediately begin the process of collection or foreclosure or because of embarrassment associated with being a ‘bad money manager.’  However, both parties benefit when foreclosure can be avoided.

Here are some tips if you are falling behind on your mortgage payments and want to keep your home:

First and most important, contact your bank immediately.  If you explain your situation, you may be able to work out an agreement to avoid a foreclosure suit, including:

• Temporary indulgence: The lender may give you a month or two to make up the payments with no penalties.
• Deferral of principal: You pay the interest only on your loan for a period of time and then go back to making regular payments again.
• Forbearance: You stop making payments, or you have smaller payments for up to 18 months. Then, at the end of 18 months, you must make all the payments that you missed.
• Mortgage modification: You can change one or more terms of the original loan to get rid of the amount you owe. The interest rate can be lowered if current market rates are lower than the mortgage interest rate. Or, you may be able to make the mortgage last for a longer period of time so that you will have smaller payments each month.
• Refinance: You can get a new loan from another lender. You should be very careful about refinancing. You are likely to get many offers to refinance and save the home. The terms of these offers may be “predatory.”
• Repayment Agreements: You pay the overdue amount with an extra payment each month. You can usually only do this for 12-18 months. A credit counseling agency may also help you get a workout agreement to prevent foreclosure.

Be sure to contact a reputable credit counseling agency.  All too often, homeowners fall prey to unscrupulous companies that offer to renegotiate a homeowner’s mortgage or to handle its foreclosure process, only to be burned in the process.  Instead, consider speaking with a HUD-approved foreclosure avoidance counselor.

If you did not contact the bank yourself, and you receive any letters from the bank, open and read all of them.  Make note of any deadlines given by the bank.  Make sure to keep each and every letter that you receive.  You will need these documents when speaking with a foreclosure avoidance counselor or an attorney.

If you are a homeowner and are behind on your payments but do not want to keep your house, you also have several options available:

• Sell the house: Try to sell the house yourself or through a realtor. If you can sell the house before a foreclosure sale, you might get a good enough price to avoid owing the bank money. Also, if you sell the house for more money than you owe, you will be able to save money.
• Deed in lieu of foreclosure: Any time after you are behind on your payments, you can ask the lender to let you deed the house to them. This means that you would give your lender the house. If the lender agrees and accepts a deed from you, you lose the house, but you will not owe any more money. In other words, the lender is giving up its right to sue you in a foreclosure case.
• Consent foreclosure: If the lender has already sued you, you can ask for a consent foreclosure. If the judge orders a consent foreclosure, you will not owe any money under the mortgage. But you might have to pay the lender’s court costs and attorneys’ fees.

If your bank has already sued you for foreclosure, you should speak with a lawyer about your options.  Defending foreclosure suits is seldom simple and a lawyer may be able to determine if the bank has made errors which entitle you to keep your home or help you negotiate the terms of foreclosure that are more favorable to you.  Finally, a lawyer may be able to advise you about the relative merits of filing a bankruptcy in order to protect your interest in your home.

Posted by Krystyna on January 21, 2010 at 3:35pm.