Though the possibility might seem remote, what would happen if you got sick or suffered a drastic loss of household income in 2006, and then fell seriously behind on your home mortgage payments?
Think about that - even for just a moment - because none of us is immune from unforeseen patches of rough luck.
After two months of missed mortgage payments, your house could be well along on the icy slope to foreclosure.
Do you have any idea how you would pull yourself out of that nightmare spiral?
Before answering, consider this: New consumer research reveals that 61 percent of homeowners who fall behind on their payments have no clue about the array of foreclosure-avoidance options readily available to them.
I'm not talking about hiring lawyers, filing for bankruptcy or turning over their mortgage to con artists who claim they'll solve all the problems if you'll just give them the title to the house.
I'm talking about the first and foremost go-to source for home-loan delinquency relief: the mortgage company that services your account every month.
The servicer earns its money by collecting your payments, maintaining the records on your account, and staying in touch with you on behalf of the lender or investor who owns your note. More importantly, in recent years the giants of the mortgage industry - congressionally chartered investors Freddie Mac and Fannie Mae and the government's largest home loan insurer, the Federal Housing Administration (FHA) - all have begun encouraging or requiring the servicer to bend over backward to avoid foreclosures when borrowers fall behind.
They've done this in large part for self-interested business reasons - they lose tens of thousands of dollars on average with every foreclosure. But they've done it for social policy reasons as well. They recognize the disastrous personal and financial consequences that often accompany the loss of a home to foreclosure. If they can help homeowners keep a roof over their heads, they win and the homeowners win.
How are servicers prepared to bend over backward? Their main techniques include:
"Forbearance" arrangements where the mortgage company allows a borrower to pay less than the full amount owed per month, or even pay nothing, depending upon the situation.
"Reinstatements" that permit delinquent homeowners to balance out their accounts with the mortgage company at some specified date in the future, typically by paying a lump sum.
