Foreclosures – What do I do?

The threat of losing your home is one of the biggest fears that anyone has. The anxiety of facing foreclosure on your home plays out daily across the country, as well as in our community.

Scotty Ball is a real estate attorney specializing in residential and commercial real estate law with the Stewart, Melvin & Frost law firm in Gainesville, Ga.. He can offer advice to you if you are in this terrible predicament.

Question: If you are having trouble making your mortgage payments and worry that you might be facing foreclosure, what should you do?

Scotty: Don’t panic. You do have some options. Contrary to what you may think, foreclosure is the last thing that your mortgage lender wants to see happen.

On the other hand – If you’re having trouble making your monthly mortgage payments, don’t think you’ll go unnoticed. You can’t hide your head in the sand. It’s better to be pro-active. Take charge. An open, honest and up-front approach will be viewed much better by your lender.

Also, I tell people not to blame themselves. Don’t get down on yourself. Financial hardship can deflate your confidence, but keep in mind that you are certainly not the only one who has been impacted – locally and across the country – in this far-reaching recession.

Talk to your lender. You most likely will be referred to a bank’s Loss Mitigation Department. Most banks and lending institutions have beefed up their staff in this area over the past several months.

But remember not to contact your lender until you really have a problem -because if your mortgage payments have been on time and are current, they won’t be interested in talking to you yet.

Your lender most likely can offer some options to help you. For example, they may offer to lower your monthly payment and add the additional balance onto the back end of your mortgage obligation.

Or, if you’re lucky, your lender may even allow you to waive payments for a few months to give you time to reorganize your finances. (Remember that the lender is motivated to make sure you eventually pay your mortgage – foreclosure is the last option).

Another option may be to take advantage of historically low interest rates and simply refinance your home, especially if you happen to have a high interest rate loan (7% and higher). If so, then refinancing should be your first consideration to avoid foreclosure.

And of course you can try to sell your home, although that may not happen as quickly as you would like in this slow economy. But even if you complete a “short sale” (in which you still owe money to the lender after selling your home), you’ve still improved your financial condition by at least lowering your debt obligations.

Question: What would happen if you missed your mortgage payment but didn’t contact your bank or lender?

Scotty: First, you will be contacted by the lender’s collections department. Next, if payment cannot be resolved, you would receive a certified letter of notice of foreclosure.Then the lender must advertise the foreclosure in the legal section of the local newspaper.

Most banks will give you at least three months before initiating foreclosure. But you need to understand that you can stop a foreclosure all the way up until it reaches the “courthouse steps” and you are evicted from your home.

If your home should be foreclosed upon, the worst is not over. You still will be liable for the difference between what you owe on the house and what the lender is able to sell it for. Also, your future ability to borrow or refinance will be impacted negatively as well.

That’s why foreclosure should always be your last option. It is definitely not an end-all solution.

I always encourage my clients to talk to me if they’re facing foreclosure. Like any real estate attorney, I may be able to offer some guidance and objective advice about your options. Also, we have many excellent local lenders in this community who can offer their own expertise and perspective – much more preferable than talking to someone at a 1-800 number.

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