BANKRUPTCY ASSISTANCE

Stop My Foreclosure: the Homeowners Rallying Cry

“Stop My Foreclosure!” It is the rallying cry of millions of homeowners who have found that they can no longer pay their mortgage. The reasons for this are varied. Some of the reasons are outside of a person’s control. Others are the result of homeowners not understanding the language of the loan. In any case, homeowners are saying stop my foreclosure.

In this economy, many people are losing their jobs. As a result, they can no longer afford their mortgage payments. Other people have had major medical problems which have resulted in temporary job losses and big bills to pay. These are some of the more traditional reasons that people face foreclosure.

But there are also reasons caused by the financial markets in the past 10 years. For most of that time, housing values were increasing at dramatic rates. This allowed banks to be somewhat “creative” in their financing. But the bottom has fallen out of the housing markets which has caused some people to lose their homes. This has lead to a chorus of “stop my foreclosure.”

One of the things that happened was that lenders decided that if a family couldn’t afford a traditional mortgage, they would come up with creative financing. For instance, they put people in interest only loans where the homeowner would not have to pay the principal for two years. The idea was that in two years, the home value would go up and the homeowner could refinance into a more traditional mortgage. Of course, home values declined instead and when the principal amounts kicked in, the homeowner was no longer able to afford the mortgage. This lead them to say “stop my foreclosure.”

Another example of creative financing was the “teaser rate” mortgage. This was where the homeowner paid only one or two percent interest for an introductory time – usually 24 months – after which the rate would be reset at a higher amount. There were two motives for this. The more innocent one was that the homeowner could refinance at the end of the teaser period. The more sinister one was that the loan officer would do everything possible to close the loan – and get the commission – even if it wasn’t in the best interest of the borrower. As you can imagine, many of these people are now saying “stop my foreclosure.”

Fortunately, both the banks and the government are listening to these cries. The banks have been hurting financially with some even going out of business themselves. The government cannot let the banking and financial system go under and have been working on solutions to the problem.

Some of the current proposals include extending loans to 40 years and mandatory lower interest rates. There is also a move to allow bankruptcy Judges to modify the terms of a loan if a person files for Chapter 13 protection.

Homeowners with Fannie Mae or Freddie Mac loans are in luck because these quasi-governmental agencies are now requiring that loans they backed be serviced in specific ways as specified by the Housing and Urban Development Department.

Too many people have already lost their homes. But for the people saying “stop my foreclosure” today, there is help on the horizon.