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Prevent foreclosure by seeking help early

Not being able to pay a mortgage can be frightening for many Washington, D.C., homeowners. Financial experts say far too many homeowners take a passive approach instead of pro-active approach to stopping foreclosure, and, by the time they actually act, it can be too late.

According to a recent article in the Los Angeles Times, as soon as a homeowner knows that making a mortgage payment is going to be a struggle, it's time to call the lender. Many consumers think that tipping off a mortgage company about personal financial problems will cause a foreclosure to happen sooner rather than later, which is untrue.

In fact, a lender is much more help before financial troubles become delinquent payments. Asking a mortgage company about modified payments or loan terms early is better than letting the payment ball drop and the foreclosure process begin.

Homeowners also believe that missing a single mortgage payment means instant foreclosure. The process of foreclosure does not start until a homeowner is 90 days past due. However, the sooner payment amends are made, the less chance there is for a foreclosure to take place.

When a homeowner is facing financial difficulties, dipping into piggybanks and rainy day funds to make a mortgage payment can be a good idea, but financial advisors say tapping pension plans and long-term savings is not. Speaking directly with a mortgage lender gives a homeowner options they may not have thought of.

If confronted with the possibility of foreclosure, homeowners often panic and turn to anyone who promises to help dig them out of debt. Consulting a no- or low-cost, government-sanctioned credit counselor or an independent financial advisor for budgeting help may be helpful. However, beware of signing any high-pressure deal that requires hefty up-front fees. These indicators could foreshadow a scam.

Even when a lender isn't willing to modify loan terms, federal or state programs may be available to help. Discussing alternatives with a certified financial counselor at the first sign of trouble can bring these foreclosure-preventing options to the surface.

In some situations, bankruptcy may be a viable option to prevent a foreclosure. Although it may seem like a drastic approach, bankruptcy can help a homeowner restructure debts, create payment plans, and halt foreclosure.

Source: Los Angeles Times, "Foreclosure myths, debunked," Lew Sichelman, 12 June 2011

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