The housing boom which lasted till last year saw prices moving up rapidly.As a result home buyers not only had to put in that little bit extra to buy a home, but some also overextended themselves by buying homes they really couldn't afford. In order to buy homes people used innovative and risky schemes of financing such as no down-payment, interest only, negative amortization and piggyback loans which put the borrowers in a precarious position. The most popular was the Adjustable Rate Mortgage or ARM in which the borrower paid very low rates of interest for the first two years and the rates automatically reset thereafter at much higher levels.Such loans usually carry a pre-payment penalty to discourage premature repayment.
Things were OK as long as prices were going up rapidly, often on a monthly basis.People were confident that should the need arise they could sell their house, pay off the loan, and still be left with a profit.But with prices falling the homeowners are staring at losses and high interest borrowings which need to be repaid. Unfortunately the future is also quite bleak. many of the loans that will automatically reset after two years were issued in 2005 and 2006. It is feared another wave of foreclosures will hit the market in late 2007 and early 2008 further depressing property prices. According to Realty Trac Inc. foreclosure filings in August this year were 243,947 a rise of a whopping 115 percent over the same month a year ago. This figure is also up by almost 35 percent over the figure of 179,599 in July this year. Desperate sellers are unable to find buyers, and with realty developers offering steep discounts they find that the value of their houses has fallen further.
But there are some simple things you can do to prevent foreclosure.
The very first thing to do is to call your mortgage lender. Remember they are not in the business to foreclose on property. They will work with you and help you find a way to keep your house.Discuss your problem with them honestly and in detail. They can help you in many ways. Each case is usually considered on an individual basis. The lender usually starts with debt counseling He looks at all your outstanding debts to see if they can be restructured or consolidated. He can then help you prepare a budget to structure a repayment plan. He may also agree to extend the period of your mortgage which will reduce your monthly payment. Overdue payments can be added to the new loans. If you are working with your lender he may grant you extra time to get your problems under control. He may allow you to sell off your home and repay the entire loan. Alternatively you may sign the house over to the lender. This is a kind of voluntary foreclosure but you avoid the public notice of a foreclosure sale.Also if the house sells below the debt amount you may not be liable for the loss.As a last resort you may file for bankruptcy. Although this will severely damage your credit record for seven years, foreclosure proceedings are usually stopped till bankruptcy is resolved.
You can also tighten your belt, go in for strict budgeting and dig into various savings here and there to come up with that bit of extra cash which will see you through this bad patch and let you keep your home.Contact an HUD approved counseling agency only. Beware of scamsters who promise to get foreclosure proceedings stopped if you sign documents appointing them as your agent.You may be signing over the title of your property.
Act promptly and you may continue to enjoy the home you have bought.