With the economic downturn, more and more people are losing their homes. If your bank has such a program, its foreclosure loans program may be able to help you stay in your home.
Foreclosure loan programs are simply another loan to replace your current loan. Assuming that your credit is still good, the lending institution will issue you a new loan. The new loan will be used to pay off the remaining mortgage payments on the home. So now, you still have one loan to repay the same as before.
The difference is that the new foreclosure loan is structured to make your monthly payments easier. This is done in one of two ways. Either the loan term is extended, for example from 30 years to 40 years or the interest rate on the loan is dropped. Either way will result in your monthly payments to the bank being much less and hopefully give you the breathing space you need to stay in your home.
An Alternative to Foreclosure Loans
An alternative to the foreclosure loans program is what some banks call a re-aging of your loan. If you have fallen behind on your payments due to a few bad months financially, you can ask the bank to re-age your loan. If they agree, the will take the sum of your back payments, plus interest, plus penalties, and add them to your remaining mortgage amount. They will then extend the term of your loan by 2 months, 3 months, or whatever amount is necessary to repay the added amount. In effect, they have let you skip a couple of payments and added those payments to the backend.
Other Special Programs
The key thing is that you always stay in contact with your lender if you are behind in your mortgage payments. They are much more forgiving and much more willing to work with you to come up with a solution if you have kept them in the loop. It is true that since the loan is guaranteed by the home they can always foreclose, resell the home, and get their money back - but most banks don't really want to do that. After all they are in the lending business not the real estate business.
Banks and lending institutions often have other unadvertised programs that are designed to help people stay in their homes. Some are used in partnership with the government such as the recent foreclosure bailout program. However, bank don't usually advertise these because they are less profitable for the bank and they don't want people unnecessarily taking advantage of them. These programs can often come in handy for those in real need of help. But, unless you are talking to the people at the bank, you will never find out about these programs.
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