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Four Ways to Fend Off Foreclosure

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By Marshall Loeb, MarketWatch

RISMEDIA, Oct. 10, 2007-(MarketWatch)-Foreclosures more than doubled over the past year, thanks in large part to the subprime lending crisis. And with monthly payments set to increase on two million mortgages over the next 18 months, things may get worse before they get better, warns Nick Jacobs of the nonprofit National Foundation for Credit Counseling.

When faced with the possibility of foreclosure, many people are paralyzed by fear. But it’s important to contact your lender as soon as possible to discuss your options. If a lender believes you are acting in good faith, it will often work with you to find an alternative payment schedule.

But your chances of getting assistance go way down after you’ve missed three or four payments, warns the Federal Trade Commission.

If you’re having trouble making mortgage payments on your home, you may consider the following alternatives to foreclosure:

- Repayment plans. If you haven’t missed many payments, you can ask your loan holder to allow you to pay off the money bit by bit, adding a portion of the past due amount to your regular payments.
- Reinstatement. If you’re experiencing a temporary shortfall of cash, your lender may offer you a fixed amount of time to pay off the past due amount. But be aware: you’ll also be responsible for covering any late fees and penalties you’ve incurred.
- Forbearance. If you lose your job or are otherwise unable to make your monthly payments, your lender may agree to reduce or suspend your payments for an agreed upon period of time. Once your monthly payments kick back in, you will required to pay off the past due amount, in pieces or in one lump sum.
- Loan modification. If your income is permanently reduced, your lender may consider changing the terms of your mortgage by reducing your interest rate, lengthening the term of the loan, or adding the past due amount to your loan balance.

For more information on your options, visit the NFCC’s Housinghelpnow.org. The Web site provides a wide array of tools and information for homeowners in danger of foreclosure and can also help you locate a low-cost, certified housing counselor in your area.

Marshall Loeb, former editor of Fortune, Money, and the Columbia Journalism Review, writes for MarketWatch.

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