How to Avoid Foreclosure on Your Home

Facing a foreclosure on your home is a scary reality for many Americans today — but it isn't unavoidable. Here are options for anyone facing foreclosure, and how to keep it from happening.

Copyright © 2007 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

ALEX CHADWICK, host:

Back with DAY TO DAY.

Real estate foreclosures come at a cost, and not just to the people who are losing their homes. Think about their neighbors whose property values go down. And local governments, they lose tax revenue. And the lenders, they're losing money too.

A congressional report figured the cost to be about $78,000 per foreclosure. The same report found it could cost as little as $3300 to prevent those foreclosures. Now that sounds like a bargain, doesn't it?

Joining us to talk about ways of avoiding those costs, the big ones, DAY TO DAY's own personal finance contributor, Michelle Singletary. Michelle, welcome back. And what is the worst thing a person could do, do you think, when facing foreclosure?

MICHELLE SINGLETARY: The worst thing you can do is do nothing. And the fact of the matter is many homeowners do just that. In one survey, the majority of homeowners who were contacted by either their lender or their loan servicer did not return those calls or letters to figure out what they could do. And there was something they could do had they contacted the lender. Many homeowners have options to prevent a foreclosure.

CHADWICK: So what are some of the options? What could people do? Where could they go for advice?

SINGLETARY: Well, you know, it's interesting right now because foreclosures are up. There are lots of community organizations and non-profits and the mortgage lenders themselves have gotten together to create sort of, you know, these hot lines to help these homeowners. One of the hotlines is run by the Homeownership Preservation Foundation. It's a 24-hour hotline that you can call, and there are counselors on the line, trained counselors, to help you walk through all your various options.

And one of the options is a repayment plan. You could set up a system in which you pay back the arrears. Now it's added on to your mortgage going forward, but it is a way to get out from under and having to be foreclosed on. One thing is forbearance, in which the lender can temporarily allow you to pay less than the full amount of your mortgage or pay even nothing if they know that somewhere down the road your income is going to back to where it was before.

You can have a loan modification where they say, listen, we know this interest rate is too much for you. Let's go back in and renegotiate some of the terms of the loan. Now this isn't available for everyone, but there are definitely options that you pursue that you will not know about unless you call.

CHADWICK: I want to go back to these numbers that we cited earlier in this congressional report. The cost to the community and the lender and the neighbors of the foreclosure, $78,000, and the cost of forestalling one just $3300. I mean, it really does sound like it's honestly in everybody's best interest to find some way to make this not happen.

SINGLETARY: Absolutely. You know, the lender does not want to take your home. They want you to stay in it. In fact, there is an ad campaign by NeighborhoodWorks America and the Ad Council. And the slogan is, nothing is worse than doing nothing. Many times you have some options, just pick up that phones and call to see what those options are.

CHADWICK: DAY TO DAY's personal finance contributor Michelle Singletary. Michelle, thank you again.

SINGLETARY: You're welcome.

Copyright © 2007 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Correction July 31, 2007

An organization mentioned in the audio version of this piece was misidentified. Its name is NeighborWorks America.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: