Homeowners may be seeking avenues to pursue if they believe they will be unable to make their loan payment.  Following is an excerpt from a recent article in the Wall Street Journal with helpful tips and additional resources including advice from HUD and a new FHA program to help borrowers transfer out of high-cost loans: FHASecure Plan.

What People Can Do If Foreclosure Looms

As Mortgage Woes Mount, Squeezed Homeowners Have Options To Try to Avoid the Worst — From Counseling to the Courtroom By AMIR EFRATI September 6, 2007; Page D1 For Full Article: http://online.wsj.com/article/SB118903997029818836.html  As mortgage woes spread, what’s a nervous borrower to do? Mike Wilt, who lives in Uniontown, Ohio, is trying to figure that out. Mr. Wilt, a marketing director for a communications firm, is current on his $180,000 adjustable-rate mortgage — the home’s price when he paid for it. But he says he may soon start to fall behind, as he’s been notified that his interest rate jumped to 11.5% from 8.5% in September, which will cost him an extra $400 a month.When he tried to refinance back in March, Mr. Wilt was turned down for a loan with better terms because of his credit score; not even his boss’s friends from a local bank could help. “The rules that got me into the original mortgage had changed,” says the 31-year-old, referring to what he perceives as tougher lending standards. FIGHTING BACK  Tips for homeowners who are facing default:• Call your loan servicer. Ask for the “loss-mitigation” or “work-out” department and try to modify the loan terms.• Talk to a housing counselor. Many work free of charge and can negotiate with the servicer on your behalf.• Contact a lawyer. If you were misled or not fully informed by a broker about the terms of the loan, it might be rescindable. You may also be entitled to damages.            ——————-Call the servicer. If you fear you can’t make your payments, industry experts say, call the company that takes your loan payments, called the mortgage “servicer,” to try to improve your situation. That could mean asking for more time to pay back the loan, getting a lower rate or switching from an adjustable rate to a fixed one.Servicers are often allowed by the agreements governing loans to renegotiate terms, a process known as a “work-out” or “loss mitigation.” In recent months, with property values declining in many markets, some companies are showing more of a willingness to work out an arrangement with struggling borrowers, according to housing counselors. Larry Litton Jr., chief executive of Litton Loan Servicing, which services 370,000 mortgage loans nationwide, says the company did 1,400 modifications in August, up from 500 the previous August.Talk to a housing counselor. Counselors communicate with servicers on behalf of borrowers and can give advice on how to delay foreclosure. They are available in many cities, and their services often are free.           ———————-READER RESOURCES • Tips on how to avoid foreclosure: Dept. of Housing and Urban Development¹ | Freddie Mac²• State-specific foreclosure information³• Find lawyers who do mortgage-lending abuse cases⁴The Department of Housing and Urban Development’s Web site, www.hud.gov⁵, has a nationwide directory of counseling agencies.Beware of “foreclosure rescue” scams. Federal and state prosecutors are investigating companies that offer temporary refinancing schemes in which borrowers get to stay in the home but go deeper into debt because the payments to the “rescuer” are higher than their mortgage payments.Additional information from HUD.gov website:Avoid foreclosure prevention companies.
Many for-profit companies will contact you promising to negotiate a loan work out with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month’s mortgage payment) for information and services your lender or a HUD approved housing counselor will provide for free if you contact them. You don’t need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead.Don’t lose your house to foreclosure recovery scams!
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a HUD approved housing counselor or trusted real estate professional.

From FHA, the New FHASecure Plan:Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.“FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates,” said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. To qualify for FHASecure, eligible homeowners must meet the following five criteria:1.       A history of on-time mortgage payments before the borrower’s teaser rates expired and loans reset; 2.       Interest rates must have or will reset between June 2005 and December 2009; 3.       Three percent cash or equity in the home; 4.       A sustained history of employment; and 5.       Sufficient income to make the mortgage payment.  For more details:  http://www.fha.gov/press/2007-08-31release.cfm 

Buyers may ask: Is there any money?  Can I still get a loan?

“Yes, there is still a sound market for home loans, however, the criteria for qualifying for these loans has tightened somewhat.  With good credit and a reasonable down payment, you should be able to find a good loan. As we discussed, you will need verification that you have been pre-qualified to submit along with your offer.  You should speak with your bank or I would be glad to suggest several lenders with whom you can speak.” Buyers may ask:  Is this the right time to buy? “Yes, as we are in a Buyers market right now.  The inventory of homes that have been on the market for longer periods than expected has created Sellers that are ready to negotiate.  Don’t get me wrong, this is not a fire sale market, but one where both parties can usually come to a reasonable agreement on the purchase price.”  “Yes.  Most Sellers in this market are motivated to sell, not just to see how high a price they can get, as sometimes happens in a Sellers market.” Sellers may ask:  Is there any money? Are there any Buyers left? “Yes, there is still a sound market for home loans, however, the criteria for qualifying for loans has tightened somewhat.  This is advantageous to you, as potential Buyers looking at your home will likely be better qualified and able to complete the closing of the escrow.”  “There is a Buyer for every property.  “We need to outshine the competition in price and condition to attract the most Buyers possible”

•  Sellers may ask:  What should we be doing to sell our house with these economic conditions?

“With the information that I have provided to you about the current market, you should price your home accordingly and fairly.  You don’t have to give it away, just be within the fair market range.  Next, realizing how many other homes are competing with you, prepare your home to be the Buyer’s choice.  I will be glad to assist you with ideas of how to accomplish this.”“Let’s make sure it is priced ahead of the “slide”, not caught chasing any potential fall.”  “You must be very competitive about price and the property must show better than its competition.”

•  Everyone may ask:  What does the Credit Crunch mean for Tucson and Southern Arizona?

8/31/07 from azstarnet.com:  “Tucson home prices dropped 0.07 percent in the second quarter. And the normally booming Arizona housing market is so cold that prices could not even keep pace with the national average, which actually went up a tenth of a percent in the same period. And that figure was the smallest hike since 1994. Put in real dollars, that decline means a home that was valued at $200,000 three months earlier now is worth $580 less. “Now is the ideal time to buy because we are seeing prices lower than they have been in a long time,” said John Strobeck, owner of the Tucson based Bright Future Business Consultants. “They won’t stay as low as they are now. … I would say that within a year we will see prices inch back upward.”  … Strobeck said the decrease in prices makes perfect sense.“We see prices being pushed downward because demand is low,” he said. “It is low because everyone bought homes in 2005 and at that time, investors came into the market and pushed prices way up. What we are doing now is adjusting back to where we should be.” The statistics reflect how much the values of existing homes have gone up — or down. The agency tracks average price changes in repeat sales and refinancings of the same single family properties, using statistics from mortgage transactions. 

• Some may ask:  What if we can’t make our mortgage payment?

8/31/07 from Real Trends:  “ Getting lenders to work with borrowers is the key for many programs out there. Most non-profits and government-run programs are not offering bailouts as much as they are looking to get borrowers who obtained their mortgages under terms they couldn’t meet into more affordable situations.” 8/31/07 from the Wall Street Journal:  “Mr. Paulson and HUD Secretary Alphonso Jackson have instructed their staffs to begin working with mortgage lenders and others to identify borrowers who are in danger of defaulting. They also are trying to work with private lenders and mortgage giants Fannie Mae and Freddie Mac to develop loans for borrowers who will likely face default if they can’t get more flexible terms. 8/31/07 from the Wall Street Journal: “President Bush, looking for ways to respond to the subprime-mortgage crisis, will outline a series of policy changes and recommendations today to help borrowers avoid default, senior administration officials said.  Among the moves will be an administrative change to allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to guarantee loans for delinquent borrowers. The change is intended to help borrowers who are at least 90 days behind in payments but still living in their homes avoid foreclosure; the guarantees help homeowners by allowing them to refinance at more favorable rates. Mr. Bush also will ask Congress to suspend, for a limited period, an Internal Revenue Service provision that penalizes borrowers who refinance the terms of their mortgage to reduce the size of the loan or who lose their homes to foreclosure. And he will announce an initiative, to be led jointly by the Treasury and Housing and Urban Development departments, to identify people who are in danger of defaulting over the next two years and work with lenders, insurers and others to develop more favorable loan products for those borrowers.  President Bush, looking for ways to respond to the subprime-mortgage crisis, will outline a series of policy changes and recommendations today to help borrowers avoid default, senior administration officials said.  Among the moves will be an administrative change to allow the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, to guarantee loans for delinquent borrowers. The change is intended to help borrowers who are at least 90 days behind in payments but still living in their homes avoid foreclosure; the guarantees help homeowners by allowing them to refinance at more favorable rates.  Mr. Bush also will ask Congress to suspend, for a limited period, an Internal Revenue Service provision that penalizes borrowers who refinance the terms of their mortgage to reduce the size of the loan or who lose their homes to foreclosure. And he will announce an initiative, to be led jointly by the Treasury and Housing and Urban Development departments, to identify people who are in danger of defaulting over the next two years and work with lenders, insurers and others to develop more favorable loan products for those borrowers.” Keep the Dialogue Going…..