The Foreclosure Process: An Overview

Right now, there are more housing foreclosures going on at any point in time (and as a percentage of inventory of unsold homes) than at any prior time in the country's history. With the collapse of adjustable rate mortgages, and many first time home owners discovering that their adjustable rate mortgage has doubled their monthly payments, they're falling behind. Couple this with the refinancing boom of the last four years, and it's a crisis of epic proportions, akin to what brought down Wall Street in 1929. (Indeed, the nation's largest bank has, as a result of mortgage collapses, written off half of its assets, something that hasn't happened since the 1920s.)

Because of how these mortgages were sold, sometimes the home owners really have no clue about how their mortgage works - it was all buried in the fine print, the "independent contractor" who sold them the mortgage has already cashed his commission check (and folded up a shell company) and left the home owner and the lender holding the bag. A lot of what drove this housing bubble were people buying second and third homes trying to flip them in the housing bubble - it's taken on from pure real estate speculation, but it's put a lot of first time home owners in a very tight place. If you're one of them, read on to see what you can do.
First of all, talk to your lender. When you get that first notice from your lender, open it, call them, and see if you can work out a deferment on the interest rate increase. Hoping to put off bad news when dealing with your mortgage is a great way to ensure that you lose your home. Later letters have legal notices, and ignoring them is like ignoring your last chance options to save your home. Open the letters when they arrive, and reply to them on the same day if possible. Always communicate - your lenders want their money, but they also want to make sure you can keep paying them.

Second - cut down your expenses, or pick up a second job. Even if it's not enough to make up the balance each month, it does establish that you're serious and willing to make a good faith effort to keep your roof over your head.

Third - see about getting your mortgage refinanced. It's not going to be easy - the market is horrible for refinancing loans. If you're current on your payments and looking at ones you can't really afford in the future, this is the opportunity to try and refinance at a fixed rate loan.
Lastly - talk to your realtor. See if you can sell the home before it takes your credit rating down with it. Selling the home is a lot better than having the county list it and auction it off to the highest bidder to pay off the lender.

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