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Avoiding Foreclosure when Underwater on a Mortgage

[May 23, 2010.]


A recent survey by  RealtyTrac and Trulia found that 59% of homeowners would not walk away from their mortgages no matter how far underwater they were. The poll found that 41% would consider walking away from a mortgage loan and 1% said walking away would be their first choice if they were underwater.

Saving Your Home

The poll shows that the majority of homeowners are willing to find other options to save their homes. However, in some cases people the possibility of ending up in foreclosure is very real for people who are underwater and for those who still have equity in their homes.

“For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes. It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble,” said Trulia’s co-founder and CEO Pete Flint.  “Combined with decreased consumer interest around purchasing a foreclosure it may take even longer than anticipated to see true health return to the real estate market.”

Don't Avoid Problems with Mortgage

So what should you do if you are underwater on your home mortgage and worried about he possibility of foreclosure? 

  1. Don't panic. Letting your emotions be in control could lead to some poor decisions. A recent study by a University of Arizona law professor found that many people who strategically default on mortgages do so out of anger and frustration.

  2. Don't stick your head in the sand. Doing nothing about your financial problems won't help. If you are having trouble keeping up with mortgage payments, contact your mortgage lender to discuss your options. It may take several attempts to reach the appropriate person who can work out a plan with you. 

  3. Consider finding a reputable housing counselor who can help. A counselor can give tips for how to approach your mortgage lender to get the best results. A counselor may also know about programs in your area that are targeted at people struggling with mortgage loan payments.

  4. Consider a short sale. This could allow you to sell your home for less that what is currently owed on your mortgage. You need to get your mortgage lender on board with this plan. Also find a real estate agent who is familiar with the short sale process to help you sell the home. Finding a seller can improve the chance of getting a short sale approved by your mortgage lender.

Do you best to avoid foreclosure. Even if you are underwater on a mortgage loan don't let your emotions lead you to make poor decisions, such as walking away, that could have negative repercussions for many years.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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