Don't delay over debt woes

Personal Finance

March 20, 2007|By Eileen Ambrose | Eileen Ambrose,Sun Columnist

Maybe you're among the increasing number of borrowers struggling to make mortgage payments. Help is available.

The key: Act as soon as you sense you're having trouble.

"Borrowers may think that they are delaying foreclosure by not calling the lender - the opposite is true. The longer a borrower waits, the faster foreclosure will proceed and the fewer options there are to slow or reverse it from happening," says Carol Gilbert, program officer with the Goldseker Foundation.

She advises troubled borrowers take two immediate steps: Set up an appointment with a housing counselor. Contact the lender to start reviewing your options.

A counselor can look over your finances, advise on budgeting, alert you to mortgage programs or be on the phone with you when you talk to the lender. Baltimore residents can call 311 to be connected to a free counselor at a HUD-approved nonprofit. Others can call 888-995-HOPE (4673).

Or, Marylanders might go directly for free counseling at St. Ambrose Housing Aid Center at 410-366-8550. St. Ambrose also offers free legal help for those with low to moderate incomes.

Like you, a lender wants to avoid the costly process of foreclosure, says Keith Gumbinger, vice president with HSH Associates. "No lender in the world really wants to own real estate. That's not what they are there for," he says.

Lenders have a range of options, but which one you're offered will depend on your financial situation. Is your problem short- or long-term? Do you have equity in the home? Are you contacting the lender before falling behind, or are you deep in arrears and ignoring the bank's calls?

You might be able to refinance into another type of loan that's not as onerous, Gumbinger says. Or a lender might modify the loan by lowering the interest rate or extending the term. A lender might temporarily defer payments, but that's rare, experts say.

At Wachovia Corp., three-quarters of homeowners' problems are resolved with a repayment plan where borrowers get three months or so to make up one or two missed payments, says Jennifer Darwin, a Wachovia spokeswoman in Charlotte, N.C.

Another method is to modify the loan so that missed payments are added to the principal, she says.

Wachovia doesn't deal in subprime mortgages, which are at the root of many problems now. Residents here have a few options for getting out from under subprime and so-called "exotic" mortgages.

Neighborhood Housing Services of Baltimore, for example, refinances mortgages for Baltimore and Baltimore County residents at risk of losing their home because of a severe hardship or predatory or subprime loans. To be eligible, clients' income must be 80 percent or less of the area's median income. For a family of four, that means an income of $58,250 or less.

The group (410-327-1200) offers mortgages at below-market rates and its underwriting can be more flexible than others, says Felix Torres, executive director. Funds are limited, and the group refinances about 100 mortgages a year, he says.

Baltimore Community Lending (410-727-8590) offers refinancing under its Homeowner Emergency Loan Program (HELP) for generally low- to moderate income city residents who have been victims of predatory real estate practices. Those practices include exorbitant or hidden fees and steering consumers into subprime mortgages when they otherwise would qualify for a traditional loan, says Ruth Louie, the group's president.

Marylanders may be eligible for a new state program, Lifeline Refinance, if they have trouble keeping up with "exotic" mortgages. These include loans with adjustable rates, balloon payments or negative amortization, in which you make minimum payments but the balance keeps rising.

Residents can refinance into a fixed-rate loan of up to 40 years. To check out terms and eligibility, call 800-638-7781 or visit

In some cases, the only option will be to sell the house and move into a smaller place, says Lisa Evans, deputy director of St. Ambrose. "Some bought much more house than they can afford," she says.

To help with this, St. Ambrose recently partnered with the Greater Baltimore Board of Realtors, whose agents agree to accept a reduced commission to help troubled sellers get as much as they can from a sale, she says.

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