March 9, 2009

Many homeowners unaware of options to keep homes

By Joe Brown
President, CEO Coldwell Banker

It’s no secret that many homeowners in the South Bay are facing foreclosure because they can’t afford their mortgage payments, or they owe far more than their home is currently worth.

What’s particularly sad is that many don’t realize they have options that could allow them to stay in their homes.

Although Realtors are in the business of selling homes, right now we understand just how important it is to help neighbors keep their homes. Foreclosures have been at the core of the current economic crisis, and the Obama administration last week announced a more than $700 billion program to help stem the number of foreclosures. The Homeowner Stability Initiative would provide incentives to mortgage lenders to convince them to help up to four million borrowers on the verge of foreclosure.

In many cases, local homeowners are in danger of losing their property because of job losses or because their adjustable mortgage interest rate has increased sharply and they can’t afford the higher payments. But there are ways to avoid foreclosure. Lenders are often willing to try to work out repayment plans to avoid having to take on more foreclosed properties. But the Mortgage Bankers Association reports that half of all homeowners who end up losing their homes have never contacted their lender.

In recent weeks, Coldwell Banker Residential Brokerage launched a public education and community outreach program called “Save the Dream” to alert people that there is help available. We will offer advice, information and resources to assist homeowners through community meetings, advertisements, news announcements and daily customer interactions.

If you are facing foreclosure, it’s critical that you don’t ignore the problem. You should first reach out to your lender or a housing counseling agency to begin the process of exploring a loan workout. As simple as it sounds, you should open and respond to all mail from your lender. The first notices you receive will offer information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notices of pending legal action. The further behind you become in payments, the harder it will be to reinstate your loan and the more likely it becomes that you will lose your house.

Homeowners unable to make their mortgage payments might qualify for a loan workout option, according to the U.S. Department of Housing and Urban Development. HUD recommends checking with your lender to see what options are available. Some may not apply to loans not insured by FHA. If your problem is temporary, call your lender to discuss the following possibilities:

—Reinstatement: Lenders are willing to discuss accepting the total amount owed in a lump sum by a specific date.

— Forbearance: Lenders may allow you to reduce or suspend payments for a short period of time and then agree to another option to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time.

— Repayment plan: You may be able to get an agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up.

However, if your situation is long term, such as a job loss, or will permanently affect your ability to bring your account current it’s important to talk to your lender about mortgage modification. If you can make payments on your loan, but don’t have enough money to bring your account current or you can’t afford your current payment, your lender may be able to change the terms of your original loan to make the payments more affordable.

Some loans are changed by adding the missed payments to the existing loan balance. The lender also may change the interest rate, including turning an adjustable rate mortgage into a fixed-rate loan. And finally, many lenders are willing to extend the number of years you have to repay in order to make the monthly payments manageable.

If you’re facing foreclosure, there are lots of resources available. A good place to start is HUD’s guide to avoiding foreclosure: http://www.hud.gov/foreclosure. HUD sponsors housing counseling agencies throughout the country that can provide advice on dealing with defaults and foreclosures. Contact information is available on the HUD Web site.

HOPE NOW is an alliance between counselors, servicers, investors and other mortgage market participants. It provides counseling and assistance to homeowners. The organization has a variety of information available on its Web site, www.hopenow.com. In addition, Consumer Hope Center, www.loanhopecenter.com, provides a loan modification guide and other valuable information to help consumers keep their homes.

As a real estate professional and a longtime resident of the South Bay, I believe that we have both an opportunity and an obligation to help our neighbors and our local communities by trying to prevent as many foreclosures from occurring as possible. By helping to spread the word that homeowners do have options to keep their homes, we’ll be going a long ways to helping keep all of our neighborhoods strong and vibrant.

Joe Brown, president and COO of Coldwell Banker in Silicon Valley, Monterey Bay and the East Bay, is a 26-year real estate veteran, who oversees a team of more than 1,700 real estate professionals in 28 offices.