Your Mortgage Questions Answered

The subprime mortgage crisis is still rearing its ugly head. Should you be worried? Get answers to your pressing questions.

By Kathryn M. Tyranski

From Reader's Digest

Worried about your house being foreclosed? You’re not alone. The number of home foreclosures has increased by 141% since 2005. In November 2008 alone, there were 259,085 home foreclosures in the United States according to RealtyTrac. That number is down 7 percent from October 2008 (279,561 foreclosures), but still up 28 percent from November 2007. The bottom line: We’re not out of the woods yet. There’s hope, though. Read on for answers to some tough questions on this crisis.

Q: As a homeowner, should I be worrying about foreclosure in this economy?

A: Homeowners who have been affected by foreclosure have usually been folks who had put little to nothing down on their home, had poor credit, and opted for an adjustable rate mortgage (ARM). When the housing bubble burst, rates soared and homeowners couldn't make their monthly payments. Payments accrued to the point where lenders repossessed a property, resulting in foreclosure.

In other cases, homeowners have been targeted by and fallen victim to predatory lenders. Borrowers who have accepted loans are often stripped of home equity and are threatened with foreclosure. In these cases, borrowers are naïve and are scammed into accepting unfair loan terms, often through aggressive sales tactics. Most victims of predatory lending are unable to get a better loan elsewhere. In some cases, homeowners who have paid off their mortgage re-mortgage their property for cash. However, when these homeowners can't make the payments, their homes are foreclosed. Read about some of these heart-wrenching cases.

If you have a fixed-rate mortgage and you've been making your payments every month, you probably have nothing to worry about. But if you’re concerned, a call to your lender never hurts.

Q: I'm having trouble making my monthly mortgage payments. I haven't received any notices from the bank yet. What can I do to keep it that way?

A: The first and best thing troubled homeowners can do is talk to their lenders to see if there is a way to "workout" the debt. Debt workout programs are agreements between a borrower and a lender. Some possible workouts include:

• Temporary reduction in your interest rate (APR)


• Temporary forbearance (reducing or skipping a few payments)


• Adding missed payments to your loan balance (so you can pay them later)


• Extending the term of your loan


• Setting up a repayment schedule

The U.S. Department of Housing and Urban Development (HUD) has a very useful one-stop resource for homeowners who want to avoid foreclosure. Visit its "Guide to Avoiding Foreclosure." The guide includes resources for getting help now whether your home is already in foreclosure or is in danger of being foreclosed.

Another option for homeowners in trouble is HOPE for Homeowners, a mortgage assistance program unveiled by the Bush Administration. This program offers to refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by the Federal Housing Administration (FHA). Find out if this program may be right for you.

Since the FHA only insures the new loan, homeowners are borrowing from lenders. To see if there is a lender who participates in the H4H Program.

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