How to Get Free Help to Avoid Foreclosure and Obtain Mortgage Modifications

If your mortgage is in trouble, there are many different things you can do. Bankruptcy and Cram-downs are the two most likely to help. Bankruptcy is one of the best options out there for this situation, and very underused. Cram-downs change the terms of the mortgage to help the homeowner make their payments, it requires negotiation, but it can save your home without declaring bankruptcy.

Read short descriptions about these options below, or read the entire article on How to Avoid Foreclosure.

Bankruptcy. This is not as bad for your credit as you might think, and it has some real advantages.

A bankruptcy court judge can take all the old mortgage arrears and package them up into one debt, and eliminate or significantly reduce your credit card debt. Giving you manageable monthly payments and the ability to keep your home.

One person I have talked to was able to make monthly mortgage payments OR her monthly credit card payments (she had $30,000 in credit card debt), but not both. For her, a bankruptcy filing makes a lot of sense. It could eliminate her credit card debt and leave her solvent, able to make her monthly payments on her mortgage.

Bankruptcy will get the mortgage company’s attention and can prevent foreclosure. Even if the auction date has been set and is coming up soon, everything stops when you file bankruptcy.

“Cram-downs.” For many people, the only way the mortgage can be paid is if the terms are changed. Either the principle has to be lowered or the interest rate changed – or both. The nickname for this is a “cram-down.” This is done through negotiation.

The good news is that you can get help with these cram-downs. There are local organizations in every state, financed by HUD, that will help you with foreclosure prevention.

There is also at least one national organization offering to help you avoid foreclosure: Homeownership Preservation Foundation, (“HPF”). Both the H.O.M.E. and HPF counseling services are available to any consumer who is facing a possible foreclosure of their home mortgage. Dial 888-995-HOPE (4673) — or All assistance is free.

Do not do this without help. The lenders are really hard to deal with, partly because the company administering the mortgage has probably sold it off already and they have no reason to try to keep the mortgage in force. Often the only way they get paid is when they do the foreclosure. A true story from a foreclosure prevention agency illustrates how stupid this can be.

A man with a $495,000 mortgage could not make his payments so he went to a local HUD-sponsored foreclosure prevention agency. The agency figured out that he could afford no more than a $389,000 mortgage and got him approval for that much. They then went to the company administering the mortgage, and asked them to reduce the balance to $389,000.

The company turned them down and went ahead with the foreclosure. They ended up buying the house at auction for the outstanding mortgage of $495,000. They then listed it with a broker who sold it for $265,000! (They could have had $389,000 from the original owner, remember.) But they did not own any part of the principle, and did not care.

In the end, the original owner bought the house back for $275,000! He got a much better deal than he was willing to make, but he did have to go through the whole foreclosure mess.

Read the entire article on How to Avoid Foreclosure.

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