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Published Wednesday, June 16, 2010 in Local

Photo by Winston Skinner

“If you’re behind, it’s important you take immediate action,” says Brian Scott of CredAbility. “If you do nothing, you’re putting your home in jeopardy.”

Credit counselor offers advice for holding onto your home

By Winston Skinner

The Newnan Times-Herald

Homeowners in danger of foreclosure should contact their lenders, keep good records and get counseling from a professional.

That was the core message brought by Brian Scott, a financial education specialist with CredAbility in Atlanta at Monday's meeting of Come To The Table. About 30 people, several of them people trying to negotiate the mortgage process to save their homes, ate fried chicken and salad in the fellowship hall at St. Paul's Episcopal Church at the covered dish meal that starts each CTTT meeting.

"You're not alone," Scott told them. "Millions of people in this country have been in the same situation."

CredAbility was known as Consumer Credit Counseling Service of Greater Atlanta until May 26. "A lot of companies out there had similar sounding names," Scott said. CredAbility is a non-profit which provides financial counseling services free.

Scott was aided in his talk by Jose' Santos, a Cowetan who works as a counselor with CredAbility. Santos is active in Come To The Table.

Scott emphasized there are no quick fixes once a mortgage is in arrears. While he recommended people in that situation tap into the expertise of CredAbility's counselors, he said being in financial counseling "does not mean your home cannot be put in jeopardy."

It is wise to "sit down with a counselor and get specific answers to your questions," Scott said. He said every potential foreclosure is different. The type of mortgage, the mortgage company, the amount owed, the amount of equity, the owner's resources -- all sorts of factors play into what options are available.

"It all depends on your situation," Scott said. CredAbility can be contacted at www.credability.org or 800-251-2227.

Scott addressed the fact that people who are in danger of foreclosure often do not feel emotionally like dealing with the situation. In order to save their homes, individuals must open mail, answer phone calls and be "honest and open with your lender," Scott said.

"You cannot wait around and hope your money problems are going to go away," he emphasized.

People have many different thoughts about their homes. Many see it as security and have sentimental attachments to it. Homes are often purchased partly as an investment and for the tax break that comes with mortgage interest.

"A mortgage is your legal promise to pay the money you borrowed to buy your home," Scott said. If that contract is broken, "you could lose your home," Scott said. In Georgia, foreclosure can begin when the homeowner is as little as 90 days in arrears.

"Make sure you communicate with your lender. Let them know up front what you're dealing with," Scott said.

Statistically, someone in America loses their home for foreclosure every three minutes. Half of those people never communicated with the lender.

Scott said it is important for the homeowner to assess what brought them to the point of foreclosure. There are many different factors including job loss, divorce and a major illness. The homeowner must also evaluate how long the situation is likely to last.

"This may be something that's going to be permanent," Scott said. In that case, remaining in a home may not really be an option.

The homeowner also must look at the resources available and determine "how much you can afford toward your mortgage," Scott said.

When communicating with the mortgage holder, Scott said borrowers should ask to speak with a specialist, often listed with a with a descriptor such as loss mitigation, delinquent mortgage or home retention.

Generally, people who call a bank about an overdue loan are routed to the collections department. Loss mitigation specialists have a different role and different processes.

Scott said homeowners should keep a detailed log -- who they talked to, when, for how long and basic details of the conversation. Some of those present suggested trying to get the employee number of the person on the phone, though others reported getting even a first and last name can be difficult with some companies.

"A lot of people are under the impression that lenders want to take your property," Scott said. Lenders make money from loans and generally would rather not hold property. The foreclosure process also involves expenses the lender would like to avoid.

Santos urged people who are dealing with mortgage issues to be persistent. "Don't get frustrated. Keep calling. If you need to call twice a week -- call," he advised.

Scott suggested sending letters by certified mail to create a paper trail. E-mails can also be sent and should be printed and filed.

People attending the meeting reported several trends in their efforts to get their mortgage issues resolved. Most of the time, mortgage holders want a copy of the last two months' bank statements. Because there is a backlog, by the time the case is examined, another bank statement has been issued, and the lender will make a request for that statement.

That process can seem to be a revolving roadblock to resolution. Some people at the meeting said they have been working with their lenders for more than a year but still have not reached an agreement on how to resolve all the issues.

Scott recommended people with longterm problems contact the Neighborhood Assistance Corporation of America. He said NACA will not work for everyone and said the NACA process can take six months.

At least one homeowner at the meeting said the mortgage company did not seem interested in working with her because she had private mortgage insurance. Since the PMI will pay the mortgage if she defaults, she said she felt the mortgage holder was not interested in making any new arrangements.

Santos said in some cases a PMI will bring the mortgage current if contacted by the homeowner.

One person also spoke of the frustration of discovering a mortgage had a "suspense funds" clause. This clause meant that after the loan was in arrears, payments were accepted but not applied to the balance until the loan was current.

Homeowners also found that sometimes the company that services their loan does not own it. While negotiations are taking place with the servicing company, the investor who holds the loan must agree to modifications.

Likely resolutions from discussions with the mortgage company could include:

* reinstatement, when the borrower pays all the past due payments and the current monthly payment.

* partial reinstatement, when the borrower pays at least half the past due payments first and then pays the remainder monthly -- on a set schedule -- along with the regular payment.

* repayment plan, an option that allows the borrower to make the regular mortgage payment with the backlog divided into regular monthly payments -- usually 12 or less.

* forbearance, when the lender agrees to reduce or eliminate payments for a set amount of time with a plan for the borrower to pay all current and late house payments after that period.

* loan modification, which changes the terms of the original mortgage -- possibly lowering payments and/or lengthening the loan period.

* refinance, when the lender agrees to a new loan -- usually not an option for credit reasons for people in or near foreclosure.

If losing the home cannot be avoided, options can include:

* selling the home.

* getting the lender to agree to a short sale, where the house is sold for less than the balance of the mortgage. Scott said "making sure you get it in writing" is important.

* getting the lender to agree to a deed-in-lieu of foreclosure -- in which the owners simply deed the property to the mortgage holder to avoid foreclosure.

* finding someone to assume the loan and take up payments, which will require the mortgage holder's approval.

* for people whose homes have Federal Housing Administration loans, obtaining a claim advance in which the lender takes the past due amount and makes it a lien which must be paid -- with no interest -- when the house is sold or the mortgage is paid.

* declaring bankruptcy, which may slow but not stop foreclosure. Bankruptcy is "a temporary stoppage -- a temporary solution," Scott said. "Don't assume you can file bankruptcy and not lose your home."

Ruby Dobyne, president of Come To The Table, described Monday's program as "a most informative meeting."

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