7 Considerations for At-Risk Mortgages

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Bills.com cites ways to handle a mortgage at risk of foreclosure.

With U.S. home foreclosures approaching an all-time high, Ethan Ewing, president of free online consumer portal Bills.com, cautions homeowners to learn about and carefully weigh their options if their mortgage is in trouble.

Foreclosure proceedings threatened 2.3 million Americans last year, an 81 percent increase over the previous year. More than 860,000 homes were repossessed in 2008, and those numbers will likely increase about 18 percent this year.

"In addition to unemployment figures and job losses that have increased dramatically in recent months, and the ongoing credit crisis that limits homeowners' ability to refinance, the risk of losing a home is a real one for millions of Americans," said Ewing.
Those who are facing possible foreclosure should consider these options, Ewing said:

1.    Determine if you qualify for Hope for Homeowners. The Hope for Homeowners program, initiated by the U.S. Department of Housing and Urban Development (HUD), helps certain homeowners refinance their mortgages into a 30- or 40-year mortgage to avoid foreclosure. Homeowners must have originated the existing mortgage before Jan. 1, 2008. The existing payment must exceed 31 percent of the homeowner's gross income. Visit the Hope for Homeowners Web site to learn about other criteria and details: http://www.fha.gov/hopeforhomeowners.

2.    Refinance the loan. In the past, one option would be to refinance the mortgage for a lower interest rate and/or lower monthly payment. In today's credit market, refinancing is much more difficult, especially for people who have late payments on their credit file, have unstable income, or whose houses have declined in value. If you are relatively clear of these issues, contact a trusted mortgage lender or broker to determine your refinancing options. Learn about current rates by checking online rate comparison sites and using online calculators to determine the real costs of refinancing. These tools are available on a number of Web sites, including http://www.bills.com/calculators/.

3.    Inquire about forbearance. For temporary hardship -- for instance, an earner has an unusual, seasonal or otherwise-temporary loss of income -- lenders might grant a forbearance agreement to lower or eliminate some payments.

4.    Consider loan modification. A loan modification seeks a permanent change to the loan, such as lowering the payment and extending the loan's term, or incorporating any delinquencies into future payments. This is an increasingly popular option for homeowners grappling with unaffordable mortgage payments, and many lenders will attempt to make an affordable monthly payment plan for some borrowers

However, loan modification is not a "silver bullet" and will not work for all homeowners. The delinquency rate on loans that have been modified in the last 12 months is more than 50 percent, indicating that there is still a substantial gap between what homeowners and lenders consider to be "modified" terms.

To pursue a loan modification, contact your mortgage lender or loan servicer directly. For contact information, check with Hope Now (http://www.hopenow.com/ or 888-995-HOPE), an alliance between counselors, mortgage companies, investors and other mortgage market participants formed to help homeowners.

5.    Sell the home. Selling the home may not be ideal, but it is a way to avoid foreclosure proceedings on the house and repay the lender. Today, some homes are worth less than the mortgage amount. These cases might require special permission from the lender to sell the home at a loss (known as a "short sale") for its current value.

6.    Obtain a "deed in lieu" of foreclosure. A "deed in lieu" essentially allows the borrower to return the title or deed of the property - giving the home back - to the mortgage holder to avoid foreclosure. The borrower forfeits any equity in the property, but does not have a foreclosure on his or her credit record.

7.    Be cautious. Be wary of so-called equity skimmers. "If you face foreclosure, you will probably receive solicitations from companies looking to 'help' you prevent foreclosure by offering to sell your home for you or by taking ownership of your home," Ewing warned. "In most cases, these solicitations are scams trying to take advantage of people in difficult situations. Instead, work with a trusted lender, broker and/or Realtor."

"While it is painful to face losing your home, the earlier you can start addressing a potential problem, the more options you will have available to find the solution that is best for your financial future," Ewing said.

About Bills.com (http://www.bills.com)
Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 50,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. Its RSS feed is available at http://www.bills.com/news_releases/.

Bills.com holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine's Hot 100 list of the fastest-growing U.S. companies. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and were recipients of the Northern California Ernst & Young 2008 Entrepreneur of the Year Award.

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Aimee Bennett

Ethan Ewing
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