More People Seek Advice From Foreclosure Hotlines

October 8th, 2007

Morgan says “Foreclosure really damages your potential to be a homeowner again, or even a renter,” so she believes that even a “short-sale” or accepting a deed-in-lieu-of-foreclosure deal from the lenders is a better option than an instantaneous foreclosure. Tracy Morgan, a spokeswoman for the Home Ownership Preservation Foundation, which operates a foreclosure hotline (1-800-995-HOPE) for Neighborworks has found out that there has been a steady increase in the number of people wanting assistance regarding their property and foreclosures on them.

Doug Robinson, a spokesperson for Neighborworks believes that the ‘mixed success’ of the company is because of the ‘resource gap’ that has been created. Robinson talks about easy cases where the mortgages are held in portfolio and are not been sold into the secondary market yet. This gives the lenders more tractability in dealing with neglectful borrowers and giving them incentives such that their debts are kept up to date.

John Snyder, a home ownership specialist with Neighborworks, believes that this company helps a lot of the people who come for help. He talks about loan modification which he terms as being ‘very frequent’. In these cases, missed payments are added by the lenders and interest is backed into the principal, often stretching out the length of the loan from, say, the 340 months remaining to 360 months. Borrowers are also offered major fixes. These include rate reductions for some borrowers who’ve been on-time payers before their payments adjusted upward. Some borrowers are even offered refinancings from ARMs to fixed-rate loans.

Neighborworks and other non-profits act strictly as intermediaries; they have no ability to force agreements on lenders or borrowers. The value they provide is to get the parties talking early. Morgan says that if one works with non-profits instead of approaching the lenders directly, the work-out prospects can be improved by the borrowers. Morgan says that her company has advocates who really know the process and they validate it with their contacts which in turn can facilitate the work-out process.

Morgan says that they can look at a borrower and say whether the candidate is good for a work-out right now. If they do not suite the process they are often asked to take sometime off and repair the credit score by finding some extra income after which they can come back to the lender and be at a better bargaining position.