One way to avoid foreclosure: Just ask
Foreclosure filings, which include default and auction sale notices and bank repossessions, were up 7 percent in March from the previous month and up 47 percent from a year ago, according to the website RealtyTrac, which follows foreclosures.
California, Florida, Texas, Michigan, and Ohio had the most foreclosure filings, accounting for 50 percent of the nation's total foreclosures, RealtyTrac found.
RealtyTrac says that when you exclude mortgage defaults among subprime borrowers -- typically people with past credit issues -- foreclosure filings nationwide are at normal historic levels. However, if foreclosure activity continues to accelerate, we could see "widespread consequences" for all of us, RealtyTrac concluded.
Some steps have already been taken to help people in danger of losing their homes. Neighborhood Assistance Corporation of America, a housing advocacy group, said it has received funding from Citigroup and Bank of America to assist borrowers in refinancing $1 billion in mortgages. Freddie Mac and Fannie Mae, two of the nation's largest mortgage investors, disclosed plans that would help lenders refinance subprime mortgages held by strapped homeowners.
However, in one of my recent online discussions, several people expressed outrage at those moves to assist distressed home borrowers.
"Are we really going to bail out people who are about to get foreclosed upon?" one reader asked during the chat. "Why should they get help when there are those of us who will never own homes if the prices don't come down, and they won't come down if they continue to be artificially inflated by people who couldn't afford what they bought."
The fact is, foreclosures don't just hurt the credit and spirit of the defaulted borrowers. They can affect an entire community. "The value of surrounding homes goes down, and other homeowners will have difficulty selling or refinancing their homes, leading to further disinvestment in communities," testified Ken Wade, chief executive of NeighborWorks America, a Washington-based nonprofit, before the House Financial Services Committee.
It's absolutely in everyone's best interest to help borrowers facing foreclosure. In addition to refinancing help, there is something borrowers themselves can do to stave off a foreclosure -- pick up the telephone and call their lenders or the companies servicing their loan to explore any loan work-out options.
But the reality is that many financially strapped homeowners don't respond to calls or letters from their lenders. An overwhelming majority of respondents in a Freddie Mac survey said they didn't call the company servicing their loan because they didn't think they had any options that could help them.
No question, with many loans being sold and resold and packaged to investors, it can be difficult for borrowers to figure out who to call to resolve their arrears. Even so, as soon as you know you can't make your next mortgage payment, it's imperative to take action. You may have some options including negotiating a repayment plan, requesting forbearance, and asking to restructure the loan, Wade said.