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"Dealing With Foreclosure on Your Home"

RELEASE: November 2002
CONTACT: Paul S. Richard, ICFE Executive Director

San Diego, CA. "Possibly the most serious credit problem any homeowner can face is the potential loss of a home through foreclosure. Typically, this process starts once the payments are delinquent by three months. Eventually, if some kind of resolution between the homeowner and the mortgage lender isn't agreed upon, the lender can legally take the home from the owner to sell and recoup their losses," says the nonprofit Institute of Consumer Financial Education (ICFE), a San Diego based nonprofit group dedicated to helping people improve their spending, increase their savings and using credit more wisely.

"If you fall even one month behind on your mortgage payment, it's time for swift action because the consequences can be so severe. First, you have to ask yourself if there's a legitimate reason for your inability to make the payment. Did you lose your job or were you out of work for a while? Have you recently gone through a divorce? Or are there problems because spending is out of control?" asks the ICFE.

If you earn enough money, but can't seem to pay the bills, try to determine why. Is there just not enough time or you are not well organized? If you have enough money, but are often late with payments, you may need counseling help from an accredited, nonprofit Consumer Credit Counseling Services (CCCS) agency. They can work with you on your money management skills and help get you back on track with your mortgage and other debts.

In either case, the best way to deal with foreclosure is to communicate openly and honestly with the lender. Contact them as soon as you sense you're in trouble, even if you're only one month behind. And if you're experiencing some form of financial hardship, let them know. It's in the best interest of the lenders to keep you in your house, so they'll probably accommodate you as long as they believe you are serious about getting back on schedule.

If you're already in foreclosure you do have several options. The first one is to reinstate yourself by bringing the loan current, including all the late fees that may have accumulated. This means sending a large sum of money to cover all the missed payments and fees. If you have an investment, such as a 401k you can borrow against or cash out in an emergency, it may be worth it to save your home. Or maybe you have an extra car or a boat you could sell to raise the money. One option not recommended is getting deeper in debt to get caught up, unless you are absolutely sure you can pay the second debt off. Otherwise, you only prolong the agony because you're still overextended.

Another option is a forbearance, which means you resume your payments, with money added to your loan to cover missed payments and late fees over a specific period of time. The lender will probably also require a significant lump sum up front before agreeing to this type of arrangement.

A deferment is an arrangement wherein the lender agrees to suspend the payments for a specified period of time. It's fairly difficult to get the lender to agree to this, unless you can document that you will be receiving a large sum of money, such as a court settlement or quarterly bonus, in the near future.

Overall, there are a lot of factors that will dictate what your best decision is. If you want to resolve the debt in such a way that you vacate the property, several other options may open up for you, including an outright sale of your home. It won't necessarily save your home, however it may save your credit record. With so many options available, be sure to ask the lender or a qualified credit counselor for some more specific guidance.

If you need help reducing your debts, and or "Mending your Spending,” visit the ICFE's Web page at: http://www.financial-education-icfe.org. The site includes helpful sections on increasing savings, using credit wisely, plus "How to set up and implement a spending-plan" (with a one page work sheet). To receive the same information by mail, please send $1 and a self-addressed, 60 cent stamped envelope to:

ICFE Money Helps
PO Box 34070
San Diego, CA 92163-4070.

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

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