Facing Foreclosure?
A reported 35% increase in recent foreclosure fillings may be a result of many homeowners feeling the squeeze of increased payments as their adjustable mortgage rates went up. Hybrid ARMs with interest-only and/or flexible payments options have allowed many homeowners to keep payments unrealistically low while increasing their overall mortgage debt. Unpaid interest when choosing a flexible payment option is merely added to the mortgage principal balance so that after a year or two, homeowners can owe even more than what they paid for the property if they purchased with a no-down-payment loan.
Such scenarios can add thousands of dollars to a homeowners bottom-line balance. With many markets experiencing a slump in sales and appreciation rates stalling or property values falling, homeowners are finding they can’t sell their property quickly enough to avoid foreclosure.
One late mortgage payment can drop an individual’s credit score as much as 100 points, depending on their other credit history. A foreclosure affects credit much like a bankruptcy. Not only does it drop your score, it can result in limited loan options and/or higher interest rates in future transactions with other lenders.
With numerous subprime lenders closing their doors, regulators and lenders are anxious. The cost of foreclosure to the average lender can be as much as $50k or higher. Refinancing homeowners into more reasonable fixed rate programs seems a sound solution to the problems many are facing, but current regulations often prevent lenders and/or mortgage servicing companies from contacting homeowners until they are over 30 days late on their payments.
Any homeowner facing significant difficulty meeting their monthly mortgage obligation, whether due to rate adjustments, unemployment, illness, disability, or divorce should carefully review their mortgage note and terms. He/She should also seek the recommendations and advice of a trusted, professional financial advisor. Then homeowners can contact their mortgage lender or servicing company to find out what assistance they can provide to help the homeowner keep their home by refinancing their current loan into one with terms that are more workable for the homeowner and his/her budget.