Published on HeraldNet.com: 5/18/03

Foreclosure avoidance is easier said than done

NEW YORK - If you fall behind on your mortgage payments and want to hammer out a solution, be prepared for some hassle.

Mortgage lenders often say they want nothing more than to avoid the expense of foreclosure, and that they work hard to get delinquent borrowers back on track. Indeed, lenders tout several alternatives for borrowers who need help making payments.

But some borrowers and credit counselors say reaching a deal can be an uphill battle, and that time and money is often wasted on basic communication breakdowns, such as disappearing faxes, unreturned phone calls and a constant churn in loan case workers.

"If they would have returned my phone calls, it would have been much easier," said Cassandra, a health-care worker who didn't want her full name used.

Cassandra said she has been trying to work out a lower monthly payment plan with Washington Mutual Inc. since a divorce last year, but that the process has been derailed several times by what appeared to be inefficiencies in the system. First, the lender took months to review a payment plan designed by Cassandra and her credit counselor. Then it closed her case file after it didn't receive a fax she sent, she said.

Washington Mutual didn't comment on the individual case, but said: "Our focus is on homeowner retention, and our goal is to keep people in their homes when possible."

Of course, blame doesn't rest solely with mortgage lenders. Few delinquent borrowers initiate contact with their lenders until it's too late, said Laurie Maggiano, deputy director of the office of asset management at the Department of Housing and Urban Development.

Also, it appears lenders are making strides in providing late payers with alternatives to foreclosure. Last year, the three biggest players in home loans - the Federal Housing Administration, Fannie Mae and Freddie Mac - set a record by staving off the majority of their delinquent borrowers from foreclosure.

But lenders can exacerbate borrowers' problems when they fail to communicate basic information, said Kevin Williams, a credit counselor with Consumer Counseling Credit Service, a nonprofit agency in Fort Worth, Texas. Just finding the right contact person to deal with a late payment can be a challenge, he said.

Naturally, the best way to avoid hassles, damage to credit history and possible home foreclosure is to never miss a payment. But that's not always possible.

If you face delinquency, the first thing is to know your options by reviewing your mortgage contract. Also, check who owns the loan, which may be different from the day-to-day mortgage lender, said HUD's Maggiano. Loans insured by the FHA, Freddie Mac or Fannie Mae have tight requirements for how the lender deals with borrowers.

After you review your options, contact your mortgage lender's loss mitigation department. The earlier you make contact, the better the possible solution, Maggiano said. "If you only missed the first payment, they almost always offer you the opportunity to get on a payment plan," she said.

The loss mitigation department will ask borrowers to prove their hardship and ability to make future payments. This is where communication problems often arise, Williams said. Never assume personal information sent was received until confirmed, he added.

Cassandra suggests people consider a credit counselor because lenders are often more willing to work with professional counselors than individual borrowers.

Copyright ©2003 Associated Press. All rights reserved
posted by Las Vegas at 7:51 AM