Foreclosure rates have been skyrocketing across the country over the last 24 months. The reasons for foreclosure are varied. The most common reason for many of the foreclosures today is raising interest rates. Many homeowners choose to take adjustable rate mortgages (ARMS) instead of a traditional fixed rate loan. The interest rates on these loans are typically lower than standard mortgages for the first few years, after which the interest rate adjusts upwards, raising the monthly mortgage payment on the property. Many homeowners planned on refinancing their properties before the loans adjusted. Sadly, these homeowners found themselves unable to get new financing or that they are upside down in their homes and were unable to afford the rising mortgage payments. Other common reasons of foreclosure include catastrophic illness resulting in loss of income or large medical expenses, loss of employment and divorce.

When facing foreclosure, many homeowners don’t know where to turn or what to do. Most homeowners don’t realize that there are many alternatives to foreclosure. For instance, the type of mortgage you have may give you possible alternatives. Government loan programs like FHA and VA mortgages are a good example. Some states, like Nevada, have set up free resources to help homeowners who are facing foreclosure.

Saving your Property

Sometimes bad things happen to good people. It happens all the time. Not all homes that go into foreclosure are taken over by the bank. At times, depending on the circumstances, the lender may be willing to work with the homeowner to avoid foreclosing on the property. For example, if a homeowner is experiencing a temporary setback like the loss of employment, the lender may decide to work something out to allow the homeowner to make up the payments. The lender may allow the homeowner to start making monthly payments again adding in an additional payment to catch up on the payments they missed. An option is called forbearance. It is a formal agreement where the mortgage holder agrees to reduce or even suspend the monthly payments for a set time period. Once the time period is up, the homeowner would then resume the normal monthly payments and make additional payments to make up for prior amount due. There is one other option where the homeowner can no longer afford their current mortgage payment, regardless of the reason. In some cases, the mortgage holder may opt to modify the terms of the original loan. Loan modification is not that common and is up to the lender. A good example would the conversion of an adjustable rate mortgage to a fixed rate mortgage with a lower interest rate. There are many factors that the mortgage holder will take into account before granting a loan modification, but the biggest will be the amount of equity (if any) in the property and the ability of the homeowner to make the payments on the new loan. Of course there may be other mitigating circumstances that the mortgage holder will consider as well in granting a loan modification.

Selling the Property before Foreclosure

There is the final option to avoid foreclosure—the short sale. A short sale would be warranted if the homeowner owes more than the current market value of the property (otherwise you could simply sell the home and pay off the loan). Short sales have popped up in foreclosure heavy areas like California and Nevada, especially in the Las Vegas valley. Before putting the property up for sale, the homeowner must have the mortgage holder’s approval in order to short sale the house. It is very important that homeowner use an agent that has lots of short sale experience. The process is much more complicated than a regular home sale and could take several weeks to complete the sale. Once the home is listed, any offers on the property must be approved by the bank before the sale can be completed. Once the property is sold, the homeowner may still liable for the difference depending on state law (Nevada residents are still liable).

Talk to your Lender

The important thing is to talk to your lender before letting your mortgage run 90 days past due. The earlier you start talking to them, the better your chances to work something out for both parties. Most mortgage companies have their hands full, especially the larger institutions, thus making them more likely to try to work something out. When dealing with your mortgage company, make sure you document who you spoke to and what was agreed on. Once something is worked out, get it in writing. There are companies out there for a fee that will help you with the foreclosure process. Don’t waste your money. The advice they give you can be found for free online or through a non-profit. Remember, if it sounds too good to be true, it is. Never sign anything without having a professional look it over first. The amount of fraud and scams has risen dramatically along with foreclosure rates and many homeowners have found themselves losing more than just their homes.

About the Author: Charles Richey lives in southern Nevada where he works as a webmaster for his wife’s Las Vegas real estate site. The site has information about every community in the valley, plus all of high rise condos in Las vegas for sale, area information, news and other information. Visitors can also view listings for the Summerlin real estate market as well as the surrounding cities.

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