| Free NonProfit Mortgage Foreclosure Help |
| By Credit Federal |
Published
09/30/2007
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Home Loan
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Stop Mortgage Foreclosure with Free NonProfit Help
Nonprofit community development organizations; in addition to helping poor families become home owners, are now pitching in to overcome foreclosures caused by the subprime mortgage crisis.
Organizations approved by the Department of Housing and Urban Development (HUD) are receiving mortgage borrower complaint calls about how their lenders aren't doing much to help prevent foreclosure by revising their loans.
The Home Ownership Preservation Foundation operates a foreclosure hotline (1-800-995-HOPE) for Neighborworks. Last year the hotline handled about 75 calls a day nationwide and by June, 2007, the number rose to 750. This September, that number escalated to about 1,300 calls a day. The foundation attributes the increase to the subprime meltdown.
The rise in borrowers seeking help is causing service problems. Foreclosure assistance counseling with Neighborworks which used to start almost immediately, now takes weeks before borrowers are served. And since the organization doesn't have enough counselors to serve everyone on a case-by-case basis, it's scheduling more group sessions.
Although the lending industry is providing money to help, there's still a staff shortage.
The easiest cases to help are with borrowers whose mortgages are held in portfolio, as those are the ones that lenders have not sold into secondary markets. That gives lenders more flexibility in dealing with delinquent borrowers and more incentive to help them keep their debts current, rather than taking the big expenses that come with foreclosures.
But often counselors have to confess to borrowers that their income, credit scores or lack of home equity make it impossible to help. Even outcomes defined as "successful" may be less than ideal. These include advice to do a "short-sale" or accept a deed-in-lieu-of-foreclosure deal from their lenders, which should be better for them than outright foreclosure.
Another bit of bad news, foreclosure damages your potential to be a home owner again, or even a renter.
With loan modification, lenders add the missed payments and back interest back into the principal, often stretching out the length of the loan. The monthly payments should be about the same as before the borrowers fell behind.
Forbearance, when lenders suspend payments for a month or two until borrowers regain their footings, has become a less common solution. More often lenders will offer to allow borrowers to make higher monthly payments until they catch up.
Major fixes are also being offered to some borrowers. These include rate reductions for some borrowers who've been on-time payers before their payments adjusted upward. Some borrowers are even being offered refinancings from ARMs to fixed-rate loans.
Neighborworks and other non-profits act strictly as mediators; they have no power to force agreements on lenders or borrowers. The value they provide is to get the parties talking early. The longer delinquencies last, the larger loan balances grow and the opportunities for homeowners to work out problems.
By working with non-profits instead of dealing directly with lenders, borrowers can improve their work out prospects. Counselors bypass the collections departments of lenders in favor of mitigation departments, where they can get things done. Sometimes the advice is to hold off before contacting a lender.
There are lists of HUD-approved, non-profit counseling services available on the HUD Web site. The services are free of charge.
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