While the rate of foreclosures on Maryland homes has been slowly declining in the last few years, the numbers are still staggering. On average, about 3,500 homes go into foreclosure proceedings each month. Statistically, that’s close to double the national rate. And if you’ve missed a couple of payments in a row, you could well be headed toward foreclosure of your home. So, what can you do to stave off foreclosure?
A number of things.
Don’t hide from your lender!
Many people make the mistake of going on as if nothing has happened, perhaps hoping they’ll be able to “catch up”. They ignore late payment notices, as well as phone and email requests for payment. The next thing they know, their bank or lending firm has issued a foreclosure notice. At that point, for you the option is probably come up with cash or face eviction.
Never hide from your lender! At the first inkling of financial problems, get in touch with the lender and explain what’s going on. Ask your lender for forbearance. In forbearance, your lender agrees to temporarily reduce or suspend your mortgage payments for a short period. You’re more likely to be able to get forbearance if you can show that your financial difficulties are temporary or that you’re expecting a large sum (for example, a tax refund) that will let you bring your account current. Lenders don’t want to foreclose on properties. It’s expensive and time consuming, so it’s in their interest to work with you. In many cases they might agree to extend your grace period for late payments or allow you to skip anywhere from 1-6 payments over a 1-2 year period (a forbearance). They might also accept reduced payments for up to 18 months.
Restructure your mortgage
If your financial situation has changed permanently, and your income has dropped, you may be a candidate for a loan restructure. This can involve extending the term of the loan so you have a longer period to pay, and your loan payments will be lowered, making them more affordable while spreading delinquent payment over several years.
But if you still can’t make the payments, Fannie Mae administers the Home Affordable Modification Program (HAMP), which helps modify home loans to make them more affordable for struggling buyers.
The bankruptcy option
Bankruptcy is a last resort. It’s a drastic measure and should not be taken lightly. Why? It can have a very negative impact on your credit rating for up to 10 years. This is an option that should be discussed with an attorney who specializes in this type of procedure. If you file for bankruptcy, however, your lender can’t foreclosure on your house. This gives you a window of opportunity to fix the problem and to find a solution.
If you even have an inkling that financial trouble is on the way due to a loss of income, give your lender a heads up. Remember, your lender wants you to succeed and get back on the right track. It’s in their interest as well as yours.
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