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Curing a foreclosure is
a little like curing cancer -- the sooner you catch it, the
better your chance of survival.
Early on in the default process, consumers can
still come back from the brink because they haven't missed more
than one or two monthly payments and their lenders haven't spent
too much trying to get them back in line. But as the foreclosure
process moves along, the size of the delinquent debt owed and
the bank legal costs that customers are usually charged mount.
Borrowers who try to ignore their financial problems -- and
their lenders' phone calls -- will likely lose their homes.
"As soon as you know you're going to miss
your first mortgage payment, that's when we need to be notified.
We can explain to the consumer what to expect throughout the
process," says John Lawrence, manager of borrower counseling
services with Wells Fargo & Co.'s mortgage division. "Say
they've lost their job or some other type of hardship has gone
on. We can give them time to help get their lives back in order.
"The longer that you go -- and if you're
going into a foreclosure process, there are other fees and costs
involved in that -- it does make it more difficult to ultimately
get the problem solved."
Lenders looking to help
Solving foreclosures is what companies want to do these days,
too, according to lending experts. Fannie Mae, Freddie Mac and
the mortgage servicers responsible for administering borrower
loans have all attempted to boost loan "workouts"
or "cures" and reduce the number of homes that end
up in the dreaded "REO," or "Real Estate Owned,"
category.
"Servicers should be solicitous at every
step of the process to try to help the borrower stay in the
home," says Danny Smith, manager of loss mitigation at
Fannie Mae. "The sooner that there is a connection there
between the two of them to work something out on the loan, the
more likely the borrower is to stay in the home."
Mortgage banks and investors aren't just doing
this out of the kindness of their hearts. Workouts look better
from a public relations standpoint and usually cost thousands
of dollars less than full foreclosures and home repossessions.
They also keep lenders from having to slog through the foreclosure
process, which in some states can drag on for a year and a half
or more. Regardless of lenders' motivations, the trend toward
increased workouts means borrowers have a much better chance
today of avoiding eviction than in the past.
"Put yourself in the bank's shoes,"
says Mory Brenner, a Pittsfield, Mass. attorney who works with
borrowers in foreclosure. "The person has missed one payment
or two payments and you know in your state that if the thing
goes to foreclosure, you're going to be looking at getting no
payments for a year and a half and at the end of the year and
a half, now you're going to have to market a distressed property.
"Are you going to want to help the borrower
make their payments? Absolutely."
The workout wheel starts turning once a borrower
payment becomes 16 days late. The servicer will try to get in
touch with the customer at that point and figure out a way to
bring the payment current. After the first payment becomes 30
days delinquent and the next month's payments look to be in
jeopardy, collection attempts get more and more serious. By
about 90 or 100 days, the servicer will refer the mortgage to
an attorney or other representative, who will initiate the formal
foreclosure process.
Alternative treatments
Article continued at http://www.bankrate.com/brm/news/mtg/20001019.asp?prodtype=mtg
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