Bankruptcy & Foreclosures

With 2007 nearly at an end, it’s pretty safe to say that the economy never did settle down like optimistic analysts had hoped. As a mortgage broker, I experience the effects of a stumbling subprime mortgage industry on a daily basis. According to the Center for Responsible Lending, some 2.2 million borrowers with subprime loans may face foreclosure in the next several years.

Not to scare you with this statistic, the fact is a lot of homeowners are at risk. When asked what can be done to avoid becoming a foreclosure statistic, I like to remind my clients that the foreclosure process isn’t some unforeseeable epidemic but rather a process that slowly develops. The beauty of a structured loan is that we are able to plan for it on a monthly basis. Here are some tips to keep in mind:

Don’t be afraid of longer terms. If you are having trouble making your payment, consider extending your amortization period. Switching from a 20 or 30 year to a 40 year mortgage can lower your monthly payment.

Ditch the adjustable rate. With mortgage rates on the rise, now is probably the best time to consider locking in to a fixed rate program. While variable rate mortgages often look more appealing on paper initially due to low rates, the stability of a fixed rate will make budgeting much easier.

Consider letting it go. If you’ve tried everything in your power to stay afloat but you simply cannot make ends meet, there is no shame in putting your house up for sale rather than sitting back and letting the bank take it. Not only does selling it yourself protect your credit score, some lenders will actually allow you to pay off less than you owe on the balance if you let them know you are selling for a loss.