How Homeowners can Stop Foreclosures
- If you're struggling to pay your monthly housing bill, you should immediately call your mortgage lender or bank. You should ask to speak to a loan officer and explain that you're no longer able to afford your mortgage payments. You should make it clear that you want to pay your housing bills but that you're having trouble doing so.
- You can discuss possible solutions with your lender. The lender might agree to give you a six-month break from making mortgage payments, which gives you a chance to settle your financial situation. The lender might reduce the interest rate on the mortgage loan or it might restructure the loan terms --- perhaps changing a 15-year fixed-rate mortgage to a 30-year fixed-rate loan --- to help lower your monthly payments. In extreme cases, lenders might even agree to forgive a portion of your principal balance, lowering your monthly payment in the process.
- To qualify for a mortgage loan modification, you must usually prove to your lender that you've suffered a financial hardship that makes it impossible for you to pay their mortgage bill each month. To provide this proof, you can send your lender copies of your most recent paychecks, bank savings and checking account statements, and current year's federal income tax return. You should also write a financial hardship letter that spells out, in very clear terms, the reasons why you're having so many problems paying your mortgage. Reasons might include a job loss, reduction in working hours, or a long illness or injury.
- In 2009 the federal government launched its Home Affordable Modification program, which provides financial incentives to mortgage lenders and banks that agree to modify the home loans of homeowners who are struggling to make their payments each month. Most mortgage lenders across the country are participating in the program. Ask your lender if it's offering the program; this program could help move your loan modification along more quickly.
- If you're able to work out a compromise with your mortgage lender, make sure that you can afford your new payments. It doesn't help for you to lower your monthly mortgage bill by $150 if you still can't afford the payment that remains.
