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Options for Delinquent Mortage Holders

Tuesday, December 13, 2005 posted by Tommi Crow

Nearly 70% of borrowers behind on their mortgage payments are unaware of the workout options that are available to them. More than half of all delinquent borrowers fail to ever contact their lenders at all, this according to a study released by Freddie Mac.

Freddie Mac conducted this study to find out why late-paying borrowers risk losing their homes instead of simply contacting their lender. 61% of late-paying Borrowers explained their lack of follow-up by reporting that they were unaware that there were a variety of workout options that could help them overcome short-term financial difficulties and possibly avoid foreclosure on their homes.

Delinquent borrowers have several options to explore before they lose their homes. One option is forbearance, which temporarily delays or reduces payments. Another is loan modification, which can restructure the payment term for a fixed period. These services are usually described in collection letters, but it is always up to the borrower to follow up and learn more.

“Part of the problem is that the data shows that there’s a knowledge gap. People’s interest in the options available to them is quite high, but their awareness of these options is quite low,” said Elizabeth Armet, vice president, senior account executive at Roper Public Affairs. While the likelihood of successful foreclosure avoidance depends upon each individual borrower’s financial situation, a 2004 Freddie Mac study concluded that repayment plans could lower the probability of home loss by 80 percent among all borrowers and by 68 percent among low-to-moderate-income borrowers.

If you are behind on your mortgage payments, the message is clear: when you get a phone call or letter from your servicer, don’t ignore it, act on it. Pick up the phone, call your servicer and talk to them about the possibility of forbearance or some other repayment alternative.

One simple phone call may be your best chance to avoid foreclosure.