MISSING MORTGAGE PAYMENTS? It’s not too late!

A recent report from Lender Processing Services found that 6.38 million Americans had missed a mortgage payment in April 2011. Most economists project at least 2 million households will be foreclosed on by the end of the year. Unfortunately, too few realize that there are trained real estate professionals like Certified Distressed Property Experts (CDPEs) that can help homeowners avoid foreclosure. If you or someone you know is having difficulties paying a mortgage, the most important thing to do is get help today!

What should a homeowner expect when payments are missed? How long until the bank physically forecloses and takes the house back? On average, it takes at least 120 days for a bank to fully foreclose on a property, depending on state laws and local backlogs. This doesn’t mean a homeowner should put off the inevitable. The more time a homeowner has to develop a strategy to avoid foreclosure the better.

No matter what stage of default homeowners are in the following list, they should get help immediately.

30 Days Late: The lender will attempt phone contact or send a notice in the mail.

60 Days Late: The lender will attempt to make contact by phone and follow up with another letter in the mail.

90 Days Late: The lender will send a letter demanding all past due amounts within 30 days and start the foreclosure process.

120 Days or More Late: The lender’s attorneys will take over and the homeowner will be responsible for their fees in addition to missed mortgage payments and the loan amount due.

Whether the homeowner has never missed a payment or is one or more months behind, it is important to contact the lender as soon as possible. It may be hard to believe, but the lender is interested inavoiding foreclosure, too. It doesn’t want to own the home because the expense of maintaining and selling it increases losses. The lender would rather the homeowner either stay in the property or sells the home in a possible short sale situation (more on short sales in a bit). Communicating with the lender will show it that the homeowner is trying to work towards a solution that will benefit all parties.

One of the first things a lender will want to review when a homeowner contacts them are financials. The homeowner should gather at least three months’ bank statements for all bank accounts or assets, including stocks or other investments. The lender wants to verify that the homeowner is truly suffering a hardship in order to help resolve the unaffordable mortgage.

Step #3: Contact a trained professional

At this point, the homeowner will want to contact a licensed real estate professional, who has extensive training and experience in helping homeowners navigate through foreclosure avoidance options. A foreclosure prevention strategist can show the homeowner alternatives that will help in making an educated decision. Your trusted advisor can also help put together complete financial information for submission to the lender to help prove a hardship.

Together, a homeowner and a trained professional can review options and decide upon a strategy that makes the most sense. Here are some of the alternatives available to homeowners:

– Benefit: Does not require the mortgage company or lender’s approval.

– Drawback: Requires that a homeowner be able to pay all back payments and fees.

– Benefit: Allows the homeowner to make back payments over time.

– Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed.

– Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan

– Drawback: Requires that a homeowner ‘qualify’ for the new payment and will often require full documentation.

– Benefit: Allows homeowner to keep property indefinitely.

– Drawback: The issues that can arise with a rental property are many, and rent often does not cover the full cost of property ownership and maintenance.

– Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.

– Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.

– Benefit: Does not require lender approval.

– Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall–not stop–the foreclosure process.

– Benefit: In some cases, this will lower payments.

– Drawback: In today’s market, a refinance will almost always raise mortgage payments, and is an expensive process.

– Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments.

– Drawback: Must be active military to qualify.

– Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity.

– Drawback: In many cases today, homeowners do not have sufficient equity to sell their property without negotiating a short sale (see next solution).

– Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual’s public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).

– Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way.

Once the required information is gathered and it’s established which foreclosure alternative option is best, it’s time to take action. Because time is of the essence in a potential foreclosure situation, it’s important that the homeowner and trained professional work diligently to resolve the challenge quickly and effectively.