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Facing foreclosure? Here's what you can do

November 08, 2009|By Lew Sichelman

Reporting from Washington — For most of the growing legion of financially stretched families in danger of losing their homes, there is help available -- as long as they don't bury their heads in the sand.

According to industry estimates, half of all owners who lose their homes to foreclosure have no contact with the "servicers" that mail out the statements and collect payments.

That's a mind-numbing statistic given the government's efforts to keep people in their homes. "Never in history have more resources been devoted" to solving the foreclosure crisis, says Faith Schwartz, executive director of the HOPE Now Alliance, a collaboration of housing counselors and mortgage-industry participants created to reach out to owners who cannot pay their mortgages.

But equally disturbing is the large number of homeowners who complain they hit a brick wall when they try to get through to their lenders.

To be fair, servicers have been overwhelmed. Many are still in the process of hiring people to work with troubled borrowers. And it can take months, if not years, to train them in the intricacies of loan modifications and other solutions.

"It's not for the lack of trying," says Jay Loeb, vice president of National Creditors Connections Inc., a Lake Forest firm that lenders hire to contact delinquent borrowers. "It's just they never envisioned defaults to be at this level."

At the same time, Loeb says, servicers are frustrated. According to the Mortgage Bankers Assn., servicers sometimes make two dozen attempts to reach delinquent borrowers before actually evicting someone.

So what's a borrower to do? Take charge. Here's how:

* Don't wait. At the first sign of trouble, call your servicer. If you can't get through, keep trying. "Expect long wait times," advises Greg Hebner of MOS Group, an Irvine company that helps servicers contact hard-to-reach borrowers.

Ask for the "home retention team." If you are put on hold, hang on until someone comes back on the line. Keep a record of whom you speak to and what was said.

* Know your options. The Making Home Affordable Mortgage Modification Program is the government's main program to prevent foreclosures. More than 2,300 servicing companies participate, covering about 85% of all single-family home loans, according to the Treasury Department's Laurie Maggiano.

But the program is just one of many tools available. At the discretion of the owner of your mortgage, servicers have several options at their disposal, including giving you a new loan that will lower your payments and changing the terms of your current loan. Learn about the options ahead of time by going to your servicer's website. Then check other sources online, including, Hope Now,, and BetterBorrowers.

* Build a budget. Make a list of your monthly expenditures, and then ask yourself what sacrifices you are willing to make to remain in your house.

* Manage the process. The modification process is complicated. You will be asked to fill out scads of paperwork. Take your time. According to Mortgage Bankers Assn. Vice Chairman Michael Young, 99% of the packages returned to servicers are missing documents or contain errors.

Among other things, you will be asked to explain the reason you cannot make your payments. Be honest and realistic. Also, your servicer will need to verify your current income, unemployment benefits, household expenses, tax returns, property taxes, hazard and flood insurance premiums and condo or owners' association dues. Sign every page.

Whether the servicer asks for it or not, include a letter authorizing the company to speak with your advisors -- another family member, perhaps, or your lawyer. That may speed up the process, says Jerry Alt of HEART Financial Services in Northbrook, Ill., a home-retention firm, because privacy issues preclude the servicer from sharing your personal information with a third party without written permission.

Make copies of everything you send. And then verify it was received by the right person.

* Try again. You can reapply if you are turned down, but once you enter the program's three-month trial period, there is no turning back. There is no second chance if you don't comply with your new terms, whatever they might be.

Not everyone qualifies for assistance. If you don't, perhaps it's time to consider exiting the property as gracefully as possible. Foreclosure is always a possibility, but it is usually the worst option, not just for you but also for your servicer.

That's why most will allow you simply to hand over the keys and walk away. Some will forgive the difference between what the home eventually sells for and what you owe, and some even offer cash incentives to cover your moving expenses or perhaps your first few months' rent in your next place.

Distributed by United Feature Syndicate

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