Stop Loan Foreclosure

With foreclosures reaching record highs throughout the nation, I thought it would be timely to include some information on foreclosure alternatives.

In the past, foreclosures were solely a problem for the ailing homeowner who missed their mortgage payments, but now the widespread effect of foreclosures has caused banks, mortgage lenders, and the government to add a helping hand to quell the problem.

First off, you may be wondering why banks, lenders, and the government would care you help you, the homeowner, avoid foreclosure. The fact is foreclosures cost everyone money, including the homeowner, lender, and the government an average of $80,000 per foreclosure.

And with the mortgage industry in turmoil, many banks and lenders are willing to work with homeowners to stop loan foreclosure, using a variety of methods that essentially cut their losses.

One such method is a short sale, where the bank or lender cooperates with the seller to list the home for less than the cost of the mortgage in the hopes of reducing the losses, despite failing to pay back the mortgage in full.

Not only does the homeowner avoid a nasty foreclosure mark on their credit report, but the bank or lender recoups a good chunk of what could have ultimately been lost if the borrower foreclosed.

Another foreclosure alternative involves working with your bank or lender to modify the terms of the loan. The bank may lower your mortgage rate, switch mortgage programs, or extend the amortization of your current loan to essentially lower your monthly payment, and make the mortgage more manageable.

A related alternative is working out a payment plan with your bank or lender. If you missed a few payments and perhaps received a Notice of Default, you may be able to avoid foreclosure by structuring a new payment plan that raises your monthly payment, but helps you avoid a major derogatory mark.

In addition to these foreclosure alternatives, a program called Neighborhood Assistance Corp. of America offers below-market interest rates to help homeowners in trouble stay in their homes.

Also check out the new FHASecure loan.

Recently Bank of America and Citigroup Inc. pledged $1 billion to extend the efforts of this program, which should allow thousands of families to stay put nationwide.