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Proactive homeowners may be able to prevent foreclosure

Although many economists say that the worst of the recession is behind us, financial challenges may still be dogging a lot of good people in Wayne, Michigan. When a person is facing medical debt, credit card debt and big mortgage payments each month despite a stagnant or lowered income, things can get out of hand quickly.

If a consumer falls behind on their mortgage payments, they may get scary letters from the mortgage lender. It is important that these communications not be simply ignored. There is a very real danger that a homeowner may end up losing their home.

There are a number of things a concerned homeowner can do to increase the chances of keeping their home. The first thing to do is to stay in the home and not move out. This is because many programs available to distressed homeowners are available only to people who live in the home in question.

Many lenders are willing to do a mortgage modification with homeowners. This is where the terms of a loan are modified so that the homeowner can fulfill their obligations under them. In order to be eligible for a mortgage modification, the homeowner must be able to show during the debt negotiation that they can make the payments called for in the modification.

For borrowers who are four months or more past due but no more than 12 months past due, a possible option is a partial claim from the Federal Housing Administration's FHA-Insurance fund. This is basically an interest-free loan from the government. The loan is payable when the mortgage is paid in full or the property is sold. This is a good option for people who have fallen behind but are otherwise able to make payments each month.

There are a number of other options available. One thing to remember is that if a borrower files for bankruptcy, the bankruptcy court will impose an automatic stay that can postpone foreclosure activity on a home.

Source: U.S. Department of Housing and Urban Development, "How to Avoid Foreclosure," accessed on July 26, 2015

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