Real Estate Matters
Foreclosure Isn't a Foregone Conclusion
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When it comes to foreclosure, most homeowners are clueless.
According to an update of Freddie Mac's Foreclosure Avoidance Research survey, homeowners are generally unaware of many of the options available to them if they are struggling to make a mortgage payment.
Worse, the study found that 20 percent of people say that nothing would happen after missing three or more mortgage payments because "it takes a while for anything to happen if a person is late on a mortgage payment."
In fact, in some states the foreclosure process can begin as soon as 30 days after you have missed a mortgage or home-equity loan payment.
Why aren't more homeowners tuned in to the repercussions of the foreclosure process?
"Fear and embarrassment," said Robin Stout Migala, senior delinquency resolutions manager for Freddie Mac. Some borrowers bury their heads in the sand, "hoping that everything will be okay tomorrow."
In the survey, 75 percent of those who are delinquent on their mortgages said they had tried to contact the mortgage lender directly to discuss their financial difficulties. But Stout Migala said industry observers commonly believe that just half of those who go through the foreclosure process have spoken to their lenders.
"They think foreclosure is the only option and that there is no hope, and that nothing can be done," so they don't call, she said. "After we foreclose on a piece of property, we find all the literature from the mortgage servicer in the home, unopened."
The number of foreclosures jumped nearly 80 percent from 2006 to 2007. But if the more than 2 million Americans facing foreclosure this year don't wake up to the options that are available, the number could grow even faster.
What most homeowners don't realize is that Fannie Mae and Freddie Mac, the largest players in the secondary mortgage market, encourage mortgage servicers to avoid foreclosure whenever possible. They grade servicers on how well they work out delinquent loans.
"Not only do we rank them, we pay them to do workouts. They get a certain dollar amount for every workout type. We spent $7 million in cash bonuses" last year, Stout Migala said.
What should you do if you can't pay your loan?
