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How to avoid foreclosure

Some owners believe that abandoning the house is the best solution because they have no equity. Depending on your situation, “walking away” may or may not be the way to go. Contrary to urban myth, your bank does not want to take your home away from you, especially if you owe on it more than it is worth. After all, why would the bank want to bother with your $100,000 home if it can make $238 000 of you over the life of the loan when you make your monthly payments (assuming a 30-year $100,000 mortgage at 7% interest)? If the bank were to foreclose, it would loose its $138,000 profit and have to take on the expense of foreclosing, repairing and paying a commission to real estate agent to sell your home. Your bank could be facing the possibility to loose tens of thousands of dollars and the one thing banks do not like to do is to loose money and may be willing to make a deal.

Due to the mortgage meltdown that began in 2007, the federal government, through the Federal Housing Authority (FHA) is encouraging lenders to work more closely with homeowners facing foreclosure. You may even have the option of refinancing a high-interest loan into a federally insured FHA loan with a lower interest rate, but you won’t know it until you discuss your options with your banks.
 
HUD-approved housing counseling agencies are available to provide you with the information and assistance you need to avoid foreclosure. As part of President Obama's comprehensive Homeowner Affordability and Stability Plan (HASP), you may be eligible for a special Making Home Affordable loan modification or refinance, to reduce your monthly payments and help you keep your home.

 



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