Facing Foreclosure

Kevin McCormally: I am Kevin McCormally of Kiplinger's. I am here with Pat Esswein, the Housing Editor of Kiplinger's Personal Finance magazine to talk about home for closures. Pet it's sad but hundreds and thousands of people in America are loosing their homes to work closures. What can somebody do, if they are threatened for closure? Pat Esswein: If you foresee trouble ahead then you really need to try to head it off with the pass and the way that you might do that, is to seek the council of either a Fee only Financial Planner or a Non Profit Credit Counselor and those advisors will help you look at ways to increase your income or decrease your expenses, so that you can afford your mortgage payment. Kevin McCormally: What about trying to refinance and unbearable mortgage to get a lower payment that way? Pat Esswein: That unfortunately is not an option for a lot of people facing for closure , because they actually owe more to their mortgage lender, then the house is worth. Kevin McCormally: So, what do you do if you can't refinance and you can't afford the payments, what do you do? Pat Esswein: Well you have a couple of options and the first one is to call your mortgage lender and try to work out an arrangement with them. Kevin McCormally: What kind of thing will they do for you? Pat Esswein: Well, they might propose, what they call a forbearance. With a forbearance, they might say to you, okay you are off the hook for your mortgage payment for the next few months or they might let you pay a minimum amount on your mortgage payment. Kevin McCormally: But, that's a short term solution. Pat Esswein: It is a short term solution and lenders, only typically only offer it, if you have good financial prospects ahead. If you are doing with it a chronic inability to afford your mortgage, they may not make it available to you, Kevin McCormally: Okay, you said there were two solutions. What's the other one? Pat Esswein: Well the other option is to go to your lender and propose what's known as a short sale of your home. Kevin McCormally: How does that work? Pat Esswein: Well, basically in a short sell, you go back to your lender and you propose to sell your house back to them for the amount that you owe on your mortgage and that maybe, more than house is worth. Kevin McCormally: So the lender would take a loss. Pat Esswein: Exactly. Kevin McCormally: Thanks very much Pat.