Losing your home to foreclosure is a reality many people have a hard time facing. The growing number of foreclosures in Canton, Plymouth, and the surrounding communities are accompanied by homeowners unwilling to face the facts. Instead of hiding, the best advice is to talk to your lender as soon as you can.
First, realize that you have the power to make the calls and letters stop. According to the Federal Trade Commission’s Fair Debt Collection Practices Act, you can stop the harassing phone calls and letters by writing a letter to the debt collection agency asking them to stop. Once they receive the letter, they can contact you only once more to notify you that they will no longer contact you and to inform you of any actions they intend to take to collect the debt. This puts a stop only to the phone calls and letters – it doesn’t erase the debt.
Another way to put an end to the calls and letters, at least temporarily, is to file for bankruptcy. This is not to say you should file for bankruptcy, but if you have a lot of unsecured debt (such as credit card debt as opposed to a mortgage, which is secured by your home), filing for bankruptcy could be the best option. Upon filing for bankruptcy, the courts declare an automatic stay. This means that your creditors can no longer contact you regarding your debt. If they do call you, simply tell them that you filed for bankruptcy. They then have to work through the courts to collect their debt, rather than collecting directly from you.
Knowing that you have the power to make the phone calls and letters stop can give you some breathing room, but often the best option is to simply come clean with your creditors and find out from them what your options are. The longer you wait, the less time you have to negotiate a reasonable solution and payment plan.
Call any lenders who have a lien against your home (a first mortgage, second mortgage, home equity loan, construction loan, etc.). Let them know your situation and how much you can afford to pay per month. Don’t exaggerate how much you can pay. Give a realistic estimate, and see what they have to say. Ask the lender’s representative to explain all of your options:
• How long would they give you to sell the home and pay off the debt?
• Would they be willing to negotiate a short sale – accepting less than you currently owe as “payment in full?”
• How much would it cost to reinstate the loan – catch up on missed payments (plus any penalties and interest)?
• Would the bank be willing to negotiate a forbearance, in which you could catch up on back payments in installments?
• Is the bank willing to modify the mortgage – perhaps by increasing the term (stretching payments over a longer period of time), decreasing the interest, forgiving a portion of the debt, or adding missed payments on to the end of the mortgage?
• Would the bank be willing to accept a deed in lieu of foreclosure, whereby you would provide the deed and keys for the home in exchange for having any remaining debt forgiven?
Once you have all of your options on the table, you can make a much better decision of how to proceed.
When discussing your options with the bank’s representative, remain calm, rational, and respectful, but firm. Advocate for yourself without becoming abusive. Otherwise, the person you’re dealing with may choose not to cooperate with you. Keep detailed notes of who you talked to, when, and what was said, so you can refer back to these notes if needed.
Ralph R. Roberts, GRI, CRS and his team of foreclosure experts regularly assist families facing foreclosure and have authored Foreclosure Self-Defense For Dummies (John Wiley & Sons).
During the last few years Noel and I have helped dozens of families through their foreclosure woes. Additionally we have closed over 50 short sale transactions. To successfully close these kind of transactions we have had to develop an expertise in dealing with banks and lending institutions.
If you are having foreclosure problems call us for free advice on how to handle your communications.