With the soaring number of U.S. homes in some stage of the foreclosure process, many individuals and families are wondering just what the process of foreclosure entails.
At the same time, few homeowners would welcome the prospect of discussing their situation with their banker or lender. "Especially if they're in foreclosure, talking with a lender can be intimidating," says Julie Gugin, executive director with the Minnesota Home Ownership Center, a St. Paul-based nonprofit organization that provides education and counseling on homeownership to Minnesotans with low and moderate incomes.
Fortunately, a number of organizations around the country provide free counseling and education to individuals who are having trouble making their mortgage payments. Often, it's easier for individuals to contact a counseling agency than it is to contact the bank that holds their mortgage. For one thing, it is becoming increasingly difficult to determine just which financial institution holds a particular mortgage loan, says William Bailey, professor of family economics at the University of Arkansas. "Most mortgages are bundled and sold to secondary investment groups."
Even once homeowners identify the right financial institution, there is no guarantee that it will have a local representative near the homeowner, Bailey says. In addition, homeowners often worry that the lender won't be interested in helping them, says John Snyder, homeownership specialist with NeighborWorks America in Washington, D.C., a nonprofit network of about 230 agencies across the country that provides training and financial support to promote homeownership.
Borrowers facing foreclosure typically are frightened, and most counselors have a softer approach than bankers. As neutral outsiders, the counselors also can calm fears and help homeowners clearly and logically assess their situation and options.
Many counselors also help borrowers address the underlying issues that are keeping them from being able to make payments on time. For instance, counselors often can provide employment training and resources for homeowners who are unemployed.
When it comes time to contact the financial institution, counselors at these agencies often have the phone numbers and names borrowers need to expedite communication with their lender. "Counselors can get direct lines to the servicers," Snyder says, adding that the counselors are continually expanding the network of financial institutions with which they work.
Many organizations around the country provide information on foreclosure, as well as counseling for homeowners who may be facing foreclosure. Here are descriptions of several such agencies:
* HomeLoanLearningCenter.com: Operated by the Mortgage Bankers Association, the Web site can be viewed in either English or Spanish and includes a Foreclosure Prevention Resource Center. It outlines the information on foreclosure and on working with a lender, as well as a glossary of mortgage and foreclosure terms.
* Housing Help Now: HousingHelpNow.org is an offshoot of the National Foundation for Credit Counseling. The Web site provides housing information and consumers can take the Mortgage Reality Check, where test-takers gain an understanding of how well their mortgage fits their budget and income. The site also identifies steps homeowners can take if they are behind on their mortgage payments.
* LULAC Home Buyer Center Programs: LULAC, or the League of United Latin American Citizens, formed the LULAC National Housing Commission several years ago, says Lynn Jaime, director of home counseling with the Dallas-based organization. It operates Home Buyer Center Programs in Chicago, Dallas, Phoenix and San Antonio, with several additional centers planning stages. Counselors at the centers host seminars on a number of topics, including foreclosure prevention. They'll review assistance options, provide tips on communicating with lenders, and review foreclosure laws, among other things.
Counselors also may work with homeowners and their lenders to develop a payment plan, among other things. While the majority of the commission's clients are Hispanic, counselors work with people of all ethnicities.
* Legal Aid: The many offices around the country provide legal representation for individuals and families who can't afford to hire their own attorneys. Most of its clients are at or below the poverty line, says George Castrataro, managing attorney in the Broward County, Fla., Legal Aid office. He estimates that between 60 percent and 80 percent of homeowners facing foreclosure fit into this category.
Attorneys working with Legal Aid can help homeowners facing foreclosure in several ways, Castrataro says. For example, some borrowers may be in foreclosure trouble due to a disability that prevents them from working. Legal Aid can help them make sure they get any disability payments due them. If foreclosure is inevitable, Legal Aid attorneys can tell them what to expect.
* NeighborWorks America: NeighborWorks America is a network of 238 organizations across the United States that provides counseling and education to help homeowners work their way to financial solvency. Counselors also may contact lenders to help develop a payment plan, among other things, Snyder says.
Don't wait until it's too late
Although these organizations provide a tremendous amount of information, they are a first step. There's no getting around the fact that a call or visit to a lender typically is needed, Jacobs says. That's particularly the case if the individual would like to restructure the payment schedule.
What's more, avoiding foreclosure may require significant lifestyle changes. An individual may have to develop and stick to a more modest budget. In extreme cases, counselors may recommend a move to more affordable living arrangements.
It's always best that borrowers reach out to a counselor or organization before their troubles have reached a crisis point. "There are more tools available if you're 60 days behind, versus if there's a sheriff's sale next week," says Gugin. For instance, the lender may consider a change in the payment plan or allow the borrower to defer several payments.
Better advice for consumers is to know what you can afford and how different mortgages work before taking on responsibility for one, says Snyder. Most agencies are striving to offer education to prospective homebuyers before they get a mortgage. "We strongly believe that education helps borrowers," Snyder adds.