BuyandClose.com Blog

Don't Do Nothing at All

The one thing not to do is to take an ostrich-in-the-sand approach, ignoring pleas and letters from lenders.

Lack of communication with a lender will only exacerbate problems. Lenders who don't hear from delinquent mortgage holders often have to start legal action that can lead to foreclosure.

"The worst thing you can do is avoid the phone calls, letters and/ or visits from your lender," Wockenfuss says. "The sure way to go into foreclosure is to not talk with your lender."

Ask Your Lender to Help

Typically, lenders don't want a home to go into foreclosure, because it saddles them with both a house and a financial loss. Many lenders are willing to work out alternative payment plans with homeowners who have fallen slightly behind or are struggling to make payments. These steps might include lowering the mortgage rate, extending the life of the loan or letting homeowners make up missed payments through a payment plan.

"I'd call your (mortgage) service provider and say, 'What can you do?'" says Mark Zandi, chief economist of Moody's Economy.com.

Try not to delay. Homeowners should contact their lenders as soon as they know they'll have trouble making their mortgage payments. And they should keep copies of all correspondence and a log of all the service providers they speak with.

Approach Lenders with a Plan

One mistake some mortgage holders make is simply to call their lenders and say they can't pay, says Joel Naroff of Naroff Economic Advisors. Instead, they should suggest a loan-modification or repayment plan.

"Approach them and say, 'This is what I can't pay,' and not just that you can't pay," Naroff says. "You have to have a suggestion -- say, 'I can pay this much every month.'"

Expect the Unexpected

Lenders are sometimes willing to make concessions to people who are several months behind on payments. But with foreclosures mounting, banks are facing more requests for loan modifications.

As a result, some homeowners, even those who have never before failed to make a mortgage payment, might find lenders less flexible than they'd hope.

Critics have also complained that some of the aid programs aren't doing enough to make a dent in the vast number who need help. A February report by the State Foreclosure Prevention Working Group found that only seven in 10 delinquent home borrowers were on track for assistance. The report found a "large gap" between the number of homeowners needing help and the number receiving it.