Tips for Avoiding Foreclosure

With interest rates on the rise and many adjustable-rate mortgages coming due, there has been an uptick nationally in foreclosures.

As the market steadies itself, it’s important for mortgage borrowers to maintain an open and honest dialogue with their lenders. As soon as you know you will not be able to make your mortgage payment, it is imperative to contact your lender.

“No one wants a foreclosure -- the homeowner or the banker,” said James Ballentine, the American Bankers Association’s director of housing and economic development. “Banks will work with the borrower to keep them in their home and establish a long-term relationship.”

ABA offers the following tips to help keep homeowners in their home:

-- Analyze your financial situation. It’s important to be honest when assessing your finances. Calculate all your monthly payments and find out exactly how much you will be able to afford to pay in the upcoming months.

-- Call your lender before you miss a payment. A missed payment will haunt your credit score for a long time. It’s important to talk with your lender and figure out your next steps in order to keep your credit in tact.

-- Work out a game plan. With your lender, work out a compromise on your mortgage. A foreclosure is extremely costly for a lender, so they want to avoid this outcome if at all possible. Find out if you can get an extension on your payments or a flexible payment plan.

-- Remedy the situation. A payment plan or extension is only a temporary fix to a larger problem. Meet with a financial planner or credit counselor to make a long-term plan. It’s important to make an effort to change your financial situation.