2 Million Borrowers Avoid Foreclosure

Hope Now has helped more than 2 million at-risk borrowers stay in their homes during the past 13 months. Despite this progress, foreclosures continue to climb; 91,752 families lost their homes in July. That represents an increase of 14% from June and more than double the number of July 2007, when only 42,043 homes went to foreclosure.

But even now, after months of publicity, many borrowers still fail to respond to Hope Now's offers to help. Of the nearly 1.6 million letters that have gone out since November 1, 2007 to borrowers 60 days past due, more than 80% of borrowers still had not called their lenders a month after receiving the letters.

Hope Now's repayment plans simply give borrowers more time to pay lenders what they owe, either by extending the term of the loan or by raising monthly payments. They work best for borrowers who were thrown off the track by one-time events, such as an illness or temporary job loss. But by and large they're considered to be fairly ineffective at preventing foreclosures in the long run, since borrowers often cannot afford the original terms of their loans.

If you're in even the slightest bit of trouble financially where getting behind in your monthly mortgage is beginning to look like a reality for you, talk to your lender BEFORE it happens. Don't wait until you've missed a payment or two. Lenders don't want your home. They want you to stay in it and keep paying, so most will work with you if you just communicate to them that you need temporary help.

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How to Come Up With a Down Payment

Not long ago, no-down-payment loans were big for homebuyers. But now that lenders have tightened their standards, borrowers once again are expected to pony up some cash of their own for a down payment.

Many homebuyers have difficulty coming up with a down payment. Here are some ways to do it:

• Set up an automatic saving plan.
• Get a gift from your parents, grandparents, other relatives or friends.
• Sell a car, boat, motorcycle, collectibles or other assets.
• Liquidate stocks, mutual funds, savings bonds or other investments.
• Allocate your income tax refund.
• Take a loan from your 401(k) retirement plan and repay yourself with interest.
• Withdraw funds from your 401(k) plan, subject to taxes and penalties.
• Collect on a loan that you made to someone else.
• Get a bonus from your employer.
• Explore homebuyer programs for public servants if you qualify.
• Apply for a state or local government down-payment program.
• Use a private down-payment assistance program.

Lenders need to know how you obtained the funds and that you've had control of those funds for at least several months.

Gifts and seller's concessions are acceptable, up to the percentage allowed by the loan program, but borrowed money can't be used as a down payment, as it is debt that has to be repaid.

Two government-run programs are designed to aid homebuyers who haven't saved much for a down payment. The Federal Housing Administration offers mortgage insurance that allows qualified buyers to purchase a home with a 3% down payment, all of which may be a gift. The U.S. Department of Veterans Affairs offers a home-loan guarantee program that helps military veterans buy homes with no down payments.

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Filing Bankruptcy to Stop Foreclosure?

Some homeowners facing foreclosure are considering filing bankruptcy. Even though this might be an option for some people, there are a lot of other things you should try before filing bankruptcy to stop foreclosure.

The first thing you need to do is contact your mortgage lender. The sooner you do this the better. It's best to contact your lender as soon as you realize you might miss a payment. not after you've already missed one or two. Then your mortgage lender will be more likely to negotiate other options with you so you will not have to consider filing for bankruptcy.

Some of the possibilities you can try to negotiate with your lender would be reinstatement, forbearance, or a repayment plan, all of which are options if your money problems are temporary. If your money problems are not temporary, before you can try to negotiate with your lender to get a mortgage modification or a partial claim.

If none of these solutions will work for you and you won't be able to keep your home, before filing bankruptcy to stop foreclosure you should try to sell your home, or see if the mortgage company will allow assumption, a pre-foreclosure sale or short sale, or the deed-in-lieu of foreclosure.

All of these options require you to work with your current mortgage lender. If your mortgage lender is not willing to negotiate with you, you can try calling a HUD approved foreclosure counseling agency to get some assistance going over your options. These are usually free.

If at all possible you should avoid filing for bankruptcy as this will impact your credit rating and make things difficult for you in the future. Filing bankruptcy to prevent foreclosure is also not an option for everyone, and not all types of bankruptcies actually stop foreclosure.

A Chapter 13 Bankruptcy can stop foreclosure, so if you are thinking of filing bankruptcy, you should check to see if you quality for this type of bankruptcy, as not everyone does.

Be advised that filing bankruptcy to stop foreclosure won't mean you no longer have to make any payments on your house. A part of Chapter 13 Bankruptcy is a payment plan to pay off at least part of the money you owe to creditors such as your mortgage lender.

Remember, don't wait until you've already missed a payment or two before talking to your mortgage lender. Do it early!

FHA Secure Helping More Homeowners

Last year, the FHA rolled out FHASecure, a loan program designed to help homeowners with adjusting ARMs (adjustable rate mortgages) get a fixed rate. Last month, FHA re-launched FHA Secure with some fresh new guidelines aimed at helping even more homeowners.

You can even qualify for FHA Secure if you missed up to 3 mortgage payments in the last 12 months. If you are not current on your mortgage payment, your missed payments must be the result of an adjustable rate mortgage (ARM) that reset or an “extenuating circumstance.” Extenuating circumstances, as defined by the FHA, include:

• Income loss by an event beyond control of the homeowner
• Job loss
• Non-covered medical bills

If you are current on your mortgage, but have an ARM that will be adjusting or have a mortgage which is more than the current value of your home, FHA Secure may also be an option for you.

When you owe more on your mortgage than what your home is worth, you may be at the mercy of your current lender when transitioning into FHA Secure.

It may be worth your while to speak with a mortgage banker who is approved by FHA and able to offer FHA Secure to find out if you qualify. While the guidelines of FHA Secure may seem daunting, having a new mortgage you can afford is something everyone can get their heads around.

Mortgage Points: Why Pay For Them?

If you are in the market for a home or considering refinancing your current mortgage, you probably have heard your mortgage professional talking about points. They may advise you to buy points or they may advise you not to, depending on your situation. The question is, do you really understand points and when it makes sense to buy points?

A point is 1% of the loan amount. So, one point on a $100,000 mortgage costs $1,000. Points can be purchased in increments down to an eight of a point. It's not any more complicated than that. When should you buy mortgage points?

The pros of doing this are really pretty easy to understand. By pre-paying your interest, you get a lower rate and therefore a lower payment for the life of your loan. The cons of buying points are that you must stay in the home for a certain period before you "break even" on the transaction.

For example, if you have a $200,000 mortgage and you buy two points, you will pay $4,000 for those points at closing. If buying the points lowers your payment $250 a month, you'll need to stay in your house at least 16 months to break even (16 × 250 = 4000). In this example, after 16 months you'll start making money. After several years, you'll save a lot of money.

One other thing to keep in mind about buying points up front: Points may be tax deductible, so there is an added benefit if you qualify for the tax deduction. Check with your tax advisor before you deduct points on your taxes.

If you have any questions or comments about points, just click the comment link below and sound off. We'll get back to you with answers to any questions you might have. We'd love to hear from you.