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HOW TO HOLD ON TO YOUR HOME

Your home is probably the biggest investment you’ve ever made. Now you’re in danger of losing it to foreclosure. Yes, that’s scary, but there are things you can do to prevent that from happening.

I CAN’T PAY MY NOTE

Find and Call Your Lender, Pull Your Records Together

First, make sure you know who your lender is. Your lender’s name should be on your monthly mortgage billing statement or payment coupon book. The HOPE NOW alliance of housing counselors, mortgage companies and investors also can help locate your lender. They have lists that show: 1) the website addresses of accredited home mortgage lenders; and 2) the main phone numbers for these lenders. Click on http://www.hopenow.com/# for more information.
Next, pull together some basic information. This includes your loan account number, a list of your household expenses, and a short explanation about why you can’t pay your mortgage. Gather your tax returns, your last two monthly bank statements, the homeowner’s insurance policy, and any other recent documents that show your income. This could include pay stubs and statements for Social Security, unemployment, disability or retirement benefits. Self-employed people should furnish their tax returns or current profit and loss statements.
Once you’ve got all your records together, tell your lender right away that you can’t make the payments. In fact, tell your lender as soon as you know you’re going to fall behind. People avoid doing this because they’re afraid the lender will start to foreclose on them. But mortgage companies lose about $58,000 per foreclosure; it pays for them to keep you in your home, if possible.
It’s much better to call your lender for help. Over half of all homeowners in foreclosure didn’t do that after falling behind on their mortgage payments. Lenders can begin foreclosing on your home if you miss even one payment, because that puts you in default on your loan. Homeowners who call their lenders when they’re one or two payments behind are more likely to keep their homes than people who have missed three or more payments.
If you get a delinquency notice from your lender, open it. If you ignore it, you could get other notices telling you that you’re facing legal action. Claiming ignorance because you didn’t open the mail isn’t a valid defense in foreclosure courts.
This is what usually happens if you start missing monthly mortgage payments:

one month behind–a phone call or letter from the lender;
two months behind–the lender phones to ask why you haven’t made payments;
three months behind–the lender sends you a Demand Letter giving you 30 days to pay what you owe. If you don’t pay up or arrange an acceptable payment plan by then, the lender can begin foreclosure; and
four months behind–your case is turned over to the lender’s attorneys and you pay all attorneys’ fees.

A housing counselor can help you at any of these stages, but it’s best to respond promptly, and honestly, to all communications from the mortgage company. Meet all deadlines that the lender gives you and ONLY make promises that you know you can keep. You’ll get excellent guidance for how to communicate with your lender at http://www.consumer-action.org. Go to the Publications link, thento Select a Publications Category and click on Housing.
You have rights as a mortgage-holder, even if you face foreclosure. Find and read through your loan documents so you’ll know what action your lender can take against you.
Keep a record of all your communications with your lender–phone, fax, online, surface mail, etc. Write down the time of the contact, whom you contacted, what you said, or wrote, and what resulted from the communication.

Options for Avoiding Foreclosure

You can work with your lender to find a solution that avoids foreclosure. Lenders are required to look at options than can help you keep your home. They could offer you special programs to make that happen.
It all begins with your phone call. Be honest with your mortgage company. They’ll want to know:

why you fell behind and what you’ve tried to do to solve the problem;
if the problem is temporary, long-term or permanent;
how you think your financial situation will change in the short- or long term;
if any other financial issues could interfere with a solution;
if you will commit to a plan that lets you stay in your home;
what kind of payment arrangement you could handle; and
if you’ll return phone calls and provide the necessary forms and documentation to the lender on time.

Then your lender will send you a loan workout package. It has good information about alternatives to foreclosure, and several forms for you to complete. Fill them out and return them promptly if you want to be considered for loan assistance.
If you’re temporarily unable to pay your mortgage, the options you can discuss with your lender include:

reinstatement–where you pay off your debt in a lump sum by a certain date;
forbearance-- where you combine a brief suspension or reduction in payments with another settlement option, such as reinstatement; and
repayment– where you resume monthly payments that include past due totals. You do this ach month until you’re caught up.

If your inability to pay is a long-term or permanent problem, these are other options you can explore:

A loan modification could happen if your monthly payment is too high for you, or you can only pay part of the loan balance. Here, the lender might agree to change your loan terms by lowering the interest rate or giving you more years to pay.
A partial claim is possible if you have an FHA-insured mortgage. In this case, the mortgage company gives you a one-time, interest-free loan to pay off your loan balance. You may not have to begin repaying this loan for several years. Visit http://hud.gov for more details. Click on Avoid Foreclosure and then on Talk to Your lender.
In a property give-back, you return your deed to the lender, and the lender forgives your mortgage debt. This will hurt your credit rating, but there’s no foreclosure. You even could make a deal with the lender that lets you live in the house as a renter. The give-back option is available if you have no other liens on your property.
Filing a Chapter 13 bankruptcy may be possible, depending upon the state where you live. This also damages your credit rating, but it halts the foreclosure process. It also could make the lender accept a repayment plan that’s easier for you to afford.

On March 4, President Obama announced a new federal loan modification program designed to help millions of struggling homeowners pay their mortgage. Effective immediately, the Homeowner Affordability and Stability Plan gives lenders financial incentives to cut mortgage payments for people who can’t afford their loan. It also subsidizes interest rate reductions so that mortgage payments aren’t above 31 percent of a borrower’s income. Call you lender to see if you’re eligible.

Get a Reliable Third-Party Advisor

Your lender isn’t the only person to call if you’re facing foreclosure. Not all mortgage companies may willingly cooperate with homeowners in default. Having a dependable third-party advocate on your side can make it easier to keep your home. You can find HUD-certified counselors at mediation resources like the Homeownership Preservation Foundation’s Homeowner’s HOPE Hotline™, 1-888-995-HOPE. They’ll help you work out a repayment plan with your lender. To locate HUD-approved Housing Counselors in your area, call toll free 1-800-569-4287.
These advisors are trained in foreclosure prevention. They know the home mortgage industry inside out, and their services are free. They’ll develop solutions with specific, written action plans for solving your unique mortgage problems.
When you call, give complete, honest information about your financial situation. This should include a list of all major monthly bills. The most important bill on that list is your mortgage payment statement. (Make sure it has your mortgage loan number.)
Go to http://www.hpfonline.org/ for more information about foreclosure-prevention counselors. Click on About Foreclosure.

Financial Crisis Planning

Create a financial crisis plan that will let you pay the mortgage. That means cutting out, reducing or postponing expenses. Budget enough money for health care and housing, because they’re your top priorities, in that order. Next, look at optional expenses you can eliminate, like cable TV, club memberships, subscriptions, or season tickets. Delay payments on unsecured debt, such as credit cards, until you’ve paid your mortgage.
If you have other creditors, gather up your bills and call them. Many will agree to work out payment plans with you. You keep more of your money longer, and that savings could go towards the mortgage.
How else can you raise money for the loan? Maybe you can sell off assets, like a second car, jewelry, stocks or a whole life insurance policy. Perhaps you can get an extra job. Consider renting part of your home to a boarder. Even if these actions don’t make enough money to pay your mortgage, they show your lender that you’ll make sacrifices to stay in your home. That may persuade your lender to cut you some slack.
Once you set up a crisis budget, ask a trusted family member or friend to hold you to it. That can keep you from making emotional or impulsive spending decisions.
Stay away from financial solutions that sound too good to be true. Scam artists will offer quick-fix foreclosure advice for a price. They read foreclosure listings and then contact desperate homeowners with shady deals.
They might want to buy your home and let you rent it back. But the rent will be excessive, and the buyback price could be 50% higher than the sale price. They also can evict you whenever they want.
Or they’ll tell you they can get your loan terms changed if you give them a big payment in advance and stop paying your lender. Then they don’t follow through, and you’re in big trouble.

BE PROACTIVE IF YOU MISS ANY PAYMENTS

Isolate the Problem, Get Organized, Respond Quickly

If you discover that you missed a mortgage payment and don’t know why that happened, there’s no time to lose. First, look through all your recent bank and mortgage payment statements to see if anything fell through the cracks.
Make sure you’re haven’t been overcharged by any companies you pay through automatic withdrawal. See if any of them have charged you for a payment they weren’t supposed to get. In either case, if you’re writing a check to your lender, you might not have enough money in the bank to cover it. You could be in default without even knowing it.
Say you also pay your lender through direct withdrawal. Did you recently switch these withdrawals to a different account and fail to notify the lender? Did you switch banks or open a joint account with your spouse and not tell the lender to charge mortgage payments to this new account? If you’re going to either of those things, tell your lender and complete the necessary paperwork well in advance.
Do you have automatic withdrawal on a variable-rate mortgage, where the payment amount can change from month to month? The bank or the mortgage company has to inform you when that debit amount changes. Did they fail to do that if you saw a recent change in your monthly debit?
The bank has to investigate any automatic payment to your lender that you think were made in error. But you have to notify the bank to get that going. Federal law protects your account from those unauthorized debit transactions; you have the right to stop or reverse them. To find out more, go to www.electronicpayments.org. Click on the Direct Payment and FAQ links and scroll down to Concerns About Direct Payment.
Overdraft protection can put enough money back in your account to keep a mortgage payment check from bouncing. But this is considered a fee-based service instead of a loan, so it’s not covered by laws that regulate interest rates. You could wind up paying a very big premium for the right to overdraft your account.
With bounce protection, your bank decides whether it will cover your overdraft or let your check bounce. This usually depends on how often you’ve overdrawn your account before. Even if the bank decides in your favor, it will charge you a fee that can be steep. And you’ve got to repay the negative balance to straighten out your account. If you don’t do this quickly enough, your credit rating will suffer.
People can get a false sense of security about overdraft protection, too. If you exceed the protection limit, you’ll incur penalty fees on top of the interest rate or fee attached to the overdraft itself. Some banks may combine your actual balance with your overdraft funds and show it as your available balance. That can be very misleading.
Are you mailing your payments to the right address listed on your coupon book? Are you enclosing the coupon for that month with your check?

Persistence Pays

You have to be patient yet persistent when you call your lender to clear up a missed payment problem. The same attitude is necessary when you’re trying to get your bank to correct a withdrawal error that puts you in default. You may be put on hold and passed around to different people before you can get the help you need.
Take down the name and number of the person at the lender’s office who handles your situation. That way, you can call them back directly.
Expect that there will be back-and-forth calls as you try to fix the problem. It may seem frustrating, and even intimidating, but keep your cool. Commit to the process–however long it takes- and do whatever is necessary to get things right.
It’s perfectly normal to be anxious and fearful the first time you call your lender about missing payments. Just be polite, calm, and as clear and concise as you can in telling what happened. Once you talk with the mortgage company, and get concrete information about possible options from them, you can build confidence in your ability to handle this challenge.
You should make a record of all your communications with your lender. Note the time of the contact; that you contacted, what you said, or wrote; and what resulted from the communication.
You’ll get excellent guidance on communicating with your lender at http://www.consumer-action.org Go to the Publications link, then Select a Publications Category and click on Housing.

Identify and Contact Your Lender

If you’re not sure who your lender is, look at your monthly mortgage billing statement or payment coupon book. The HOPE NOW alliance of housing counselors, mortgage companies and investors can also help locate your lender. They have lists that show: 1) the website addresses of accredited home mortgage lenders; and 2) the main phone numbers for these lenders. For more information, click on http://www.hopenow.com/#.
Call your lender as soon as you know you’ve missed a payment. Some people avoid doing this because they think the lender will start to foreclose on them. But mortgage companies lose about $58,000 per foreclosure; they would strongly prefer to keep you in your home, if possible.
Make sure you open any delinquency notice from your lender. If you ignore it, you could get other notices telling you that you’re facing legal action. Claiming ignorance because you didn’t open the mail isn’t a valid defense in foreclosure courts.
When you miss one or more loan payments, for any reason, this is what can happen if you don’t contact your lender about it:

one month behind–a phone call or letter from the lender;
two months behind–the lender phones to ask why you haven’t made payments;
three months behind–the lender sends you a Demand Letter giving you 30 days to pay what you owe. If you don’t pay up or arrange an acceptable payment plan by then, the lender can begin foreclosure; and
four months behind–your case is turned over to the lender’s attorneys and you pay all attorneys’ fees.

If financial hardship is the reason you’re missing payments, tell your lender what the hardship is, and if it’s temporary or long-term.
Then you’ll get a loan workout package from the lender. It has information about possible options, plus forms you should complete and return promptly.
If you’re temporarily unable to pay your mortgage, the options you can discuss with your lender include:

reinstatement–where you pay off your debt in a lump sum by a certain date;
forbearance- where you combine a brief suspension or reduction in payments with another settlement option, such as reinstatement; and
repayment–where you resume monthly payments that include past due totals. You do this each month until you’re caught up.

If your inability to pay is a long-term or permanent problem, these are other options you can explore:

A loan modification could happen if your monthly payment is too high for you, or you can only pay part of the loan balance. Here, the lender might agree to change your loan terms by lowering the interest rate or giving you more years to pay.
A partial claim is possible if you have an FHA-insured mortgage. In this case, the mortgage company gives you a one-time, interest-free loan to pay off your loan balance. You may not have to begin repaying this loan for several years. Visit http://hud.gov for more details. Click on Avoid Foreclosure and then on Talk to Your lender.
In a property give-back, you return your deed to the lender, and the lender forgives your mortgage debt. This will hurt your credit rating, but there’s no foreclosure. You could even make a deal with the lender that lets you live in the house as a renter. The give-back option is available if you have no other liens on your property.
Filing a Chapter 13 bankruptcy may be possible, depending upon the state where you live. This also damages your credit rating, but it halts the foreclosure process. It also could make the lender accept a repayment plan that’s easier for you to afford.

On March 4, President Obama announced a new federal loan modification program designed to help millions of struggling homeowners pay their mortgage. Effective immediately, the Homeowner Affordability and Stability Plan gives lenders financial incentives to cut mortgage payments for people who can’t afford their loan. It also subsidizes interest rate reductions so that mortgage payments aren’t above 31 percent of a borrower’s income. Call you lender to see if you’re eligible.

Engage a Mediator

It’s a good idea to consult a foreclosure-prevention counselor if you missed payments because you can’t afford the loan. You can find HUD-certified counselors at mediation resources like the Homeownership Preservation Foundation’s Homeowner’s HOPE Hotline™, 1-888-995-HOPE. They’ll help you work out a repayment plan with your lender. To locate HUD-approved Housing Counselors in your area, call toll free 1-800-569-4287.
These advisors are trained in foreclosure prevention. They know the home mortgage industry very well, and their services are free. They develop solutions with specific, written action plans for solving your unique mortgage problems.
Be completely honest about your situation when you call. Give your counselor all pertinent financial information. This should include a list of all major monthly bills. The most important bill on that list is your mortgage payment statement. (Make sure it has your mortgage loan number).
Go to http://www.hpfonline.org/ for more information about foreclosure-prevention counselors. Click on About Foreclosure.

Put a Financial Crisis Plan in Motion

Devise a financial crisis plan that will let you pay the mortgage. Start to eliminate, reduce or postpone expenses. Budget enough money for health care and housing, because they’re your top priorities, in that order. Then look at optional expenses you can eliminate, like cable TV, club memberships, subscriptions, or season tickets. Delay payments on unsecured debt, such as credit cards, until you’ve paid your mortgage.
If you have other creditors, call them, too. Many will want to work out payment plans with you. You keep more of your money longer, and that savings could go towards the mortgage.
How can you earn money to cover the loan? Can you sell off assets, like a second car, jewelry, stocks or a whole life insurance policy? Maybe you can get an extra job. Consider renting part of your home. Even if these actions don’t make enough money to pay your mortgage, they show your lender that you’ll make sacrifices to stay in your home. That may persuade your lender to cut you some slack.
Once you set up a crisis budget, ask a trusted family member or friend to hold you to it. That can prevent emotional or impulsive spending decisions.
Reject financial solutions that sound too good to be true. Scam artists will offer quick-fix foreclosure advice for a price. They scan foreclosure listings and then contact desperate homeowners with shady deals.
They might want to buy your home and let you rent it back. The catch is that the rent will be excessive, and the buyback price could be 50 percent higher than the sale price. They also can evict you whenever they want.
Or they’ll tell you they can get your loan terms changed if you give them a big advance payment and stop paying your lender. When they don’t follow through, you’re in big trouble.

In Divorce, Seek Cooperation with Spouse

Divorces can create, or raise the risk of foreclosure for homeowners. If you’re in that position, talk with your spouse to decide these important questions:

Who will keep the house?
Will it be sold?
If you retain ownership, how much financial support do you need from your spouse to afford the mortgage payments?

You and your spouse may choose to hire lawyers to negotiate these and other arrangements. Another option that’s becoming more common today is a mediator. This person works with both of you to find common ground on issues like the division of assets.
The mediation process is cooperative rather than confrontational, and it’s much less costly and far less stressful. When the divorce is amicable and mutual, rather than hostile, mediation can be a good way to resolve questions about the house. You can find a wealth of information about the divorce mediation process, and a list of divorce mediation professionals in your state, at http://www.divorcenet.com.
There are some other big issues that can affect the mortgage situation, and your attorney or mediator can help you on these:

Preserving your good credit rating is easier if you and your spouse work together to untangle your joint financial commitments. The two of you can figure out who is responsible for ongoing debt obligations. The way to get started on this is to document all of your shared financial responsibilities. http://www.creditguard.org/ has a full list of the items you’ll want to document. Go to the Media Center link, scroll down to Educational Pamphlets and click on “Divorce & Your Credit”.

Close out all joint bank and other accounts or remove the name of the spouse who won’t have legal rights to these accounts after the divorce. Do the same thing with utilities.

If you get the car, take your spouse’s name off the lease. If the car loan is in both names, refinance it to put the loan under your name only.
It’s important to know your credit liability for any joint accounts where your spouse is supposed to pay the debt.
If you do maintain any joint credit accounts before a divorce is final, make sure they’re paid on time each month. Creditors aren’t bound by divorce decrees that make your spouse responsible for those debts; they can pursue you if your spouse fails to make the necessary payments.
Creditors don’t have to close joint accounts in case of divorce unless one spouse asks them to do that. If you ask to convert a joint account to your name, creditors can ask you to reapply for that credit on your own. The Federal Trade Commission has tips on credit and divorce at http://www.ftc.gov/bcp/consumer.shtm. Go to the Credit & Loans category at the Consumer Information link.
Let all your creditors know about the divorce. Tell them which debts your spouse owes separately.
If your ex-spouse winds up with the house and files for bankruptcy, you’re not liable for the house payments unless you co-signed for the home mortgage.
After the divorce, check your credit rating and make any changes that reflect your new financial status.
Dividing up credit obligations is a different process for every divorcing couple. The divorce lawyers or mediator can tell each of you what to do keep your credit intact.
How can you determine if either spouse can afford to refinance the mortgage debt or qualify for a new loan? Get a copy of your credit report to learn what the lenders will read when they review a credit application. Check the report for common credit problems and solve them. For instance, close out unused credit card accounts and pay off smaller debts.
If you can get the lender to pre-quality you, that tells you how much money you’ll get to refinance the home in your name and buy out your spouse’s equity.

Medical Emergency/Terminal Illness and Forbearance

Medical problems–like a medical emergency or terminal illness–are one of the two most common reasons people fall behind on their mortgage payments.
If either of these things happens to you or your family, tell your lender about it as soon as possible. That can keep it from issuing a default notice to you.
You’ll need a doctor’s letter, a diagnostic report, or some other document that confirms the medical condition.
In cases like this, people can ask the lender for a special forbearance of the loan. That temporarily could let you make smaller payments or even suspend them. Then, you’re required to strictly observe the new repayment plan.
Find out your options for continuing employment and health insurance. If it’s a terminal illness is it covered as a pre-existing condition under your insurance policy? Does coverage include experimental treatments? How much are the lifetime maximums? What do you pay out of pocket?
If you have to leave your job, find out how long you can stay eligible for your former employer’s group policy coverage under the Federal COBRA law. COBRA has been expensive, but the American Recovery and Reinvestment Act signed by President Obama in February now gives qualified persons 65 percent of their COBRA premium for nine months.
Consider disability insurance, if it’s applicable. Can you get it through work or a personal insurance policy? How much of your earned income will it replace? When can you begin collecting it and is it taxable? Does your state provide it?

Coping with a Layoff

Layoffs are all too common these days. When and if that happens to you, job one is finding out how to get unemployment compensation.
Every state has its own filing processes and rules about eligibility, duration of payments and how much money you can receive. http://jobsearch.about.com/ has a wealth of information about eligibility requirements, how to file for benefits, and the rules in each state. (You can apply for unemployment online, by phone and by mail in most states.) Just scroll down and click on the article link entitled “How to Deal with Unemployment”.
The amount of your benefits is tied to a percentage of your earnings over a 52-week period. Each state has a ceiling on how much unemployed persons can receive. In most states, 26 weeks is the limit on how long you can get benefits. However, the American Recovery and Reinvestment Act that became law in February allows high-unemployment states to increase the number of weeks in which workers can get federally-funded compensation once their state benefits expire. Again, to learn more, go to http://jobsearch.about.com/ and look for the section on Unemployment Extension.
States typically mail unemployment checks to recipients twice a month. In many states, you also can apply for direct deposit of your benefits into your bank or credit union account. It usually takes two business days for deposits to post after you certify that you’re eligible for benefits. A growing number of states pay with loaded debit cards that the recipients can use at approved ATMs and like any other debit card. http://www.creditcards.com tells you how it works. Type Unemployment Benefits into the search box.
Sometimes, people feel frightened or intimidated about contacting their local unemployment office. Applicants have to pass an interview–in person or by phone–in order to qualify for benefits. At that time, you’ll be asked if you’re willing to work again and ready to find a job. Sometimes, the questions may seem very personal. The best approach is to be honest and keep your cool.
The application process can go easier if you have the necessary information at hand. This includes:

social security number
address and in-state phone number;
your last salary
facts about all jobs you held within the last 18 months – where you worked, your position, your supervisor’s name and contact information

Tell your creditors when you’re laid off, and then try to work out changes in your loans that will let you repay them over time.
It may be possible to relocate to another city, state or region where the economy is stronger and long-term job prospects are better. If you’re unsure about where you can get a new start, you can consult lists that discuss the “best places” to go for available jobs, cost of living, wages and salaries and quality of life.
Unemployment compensation rarely is enough to cover home loan payments, so selling and relocating to find work may be a good option. In this market, though, do careful research to see if you can sell for a profit, or at least break even.
Do you want to rent out your existing house if you relocate? First, check with your lender and your insurance carrier to see how renting will impact your mortgage and insurance coverage. The standard homeowners’ policy doesn’t fit a rental, since you don’t have to insure the contents of the house (unless you furnish it) and you’ll be liable for injuries or damages that happen on the property. http://www.insurance.com has information on the basics of a good rental property policy.
If you don’t sell your house when you move, can you rent it for more than your mortgage payment? If not, will your new job in your new location give you enough income to cover the difference? A job that gives you the money to do that lets you rent your house in a down market. Then you can profitably sell or rent it when a recovery boosts home prices and rents.
Use your imagination to find money that can supplement your unemployment benefits. The best way to raise money is selling possessions for cash. You can go to auction sites like Craigslist and eBay to sell household stuff. Taxable (but not retirement account) investments and heirlooms are other possibilities. Under certain conditions, you might cash out certificates of deposit or whole life insurance policies.
Renting rooms or part of your house out to tenants can give you regular–rather than one-time–infusions of cash.
When you file for unemployment, ask if you can get free or subsidized training for vocational courses through the state. There may be local nonprofit agencies that provide this, too. Under the Workforce Investment Act, federal funds go towards employment and training assistance for dislocated workers who lost their jobs in a mass layoff or other major economic trauma. http://www.doleta.gov has comprehensive information about the law. Click on the ETA Library and Laws and Regulations links.
Get all the details on your severance package, health care coverage and 401K options.
Know your rights under COBRA, the Federal law that allows you, your spouse and your dependent children to receiving continuing health insurance benefits through your company’s group health plan. The U.S. Department of Labor’s Employee Benefits Security Administration has all the facts you need to know about COBRA at http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html
Part-time work can take up some of the slack caused by your layoff. You can work a part-time or freelance job and earn up to half your weekly unemployment check without having that check reduced. For every dollar you earn that’s more than half, you lose a dollar from your benefit check. Not every state allows you to collect benefits if you work-part time, so check your state’s rules.
There are job search and executive recruitment firms you can approach for help in finding work. Plus, there are numerous employment search engines and job databases you can explore, like CareerBuilder.com and Indeed.com. http://unemploymenthandbook.com has an extensive list of these sites. Your state labor department may hold job fairs in your community, too.
Don’t forget to ask your supervisor for a letter of recommendation that you can give to prospective employers.
This is the time to lower or eliminate expenditures on luxuries or optional items. Your house and health care are essentials costs, but not the pay cable channels. Do you need a land line and a cellphone? Go to the public library to do your Internet research. Dining out, club memberships, magazine and theater subscriptions and organic produce are all discretionary items. You may have to trim these back.
Since your income has gone way down, you’ll want to know what your total wealth is and how long it can last. Determining your net worth is how you find that out. Net worth is your total assets minus your liabilities, and it’s not difficult to calculate if you pull together some basic information. There’s a step-by-step process for doing this at http://financialplan.about.com Type Applying for Unemployment Insurance into the search box and go to the Job Loss heading.
Improving your job skills, or learning skills for a new occupation, can make you more attractive to prospective employers. One of the best places to go for low-or-no-cost job training and placement is your state’s Workforce Development and Training Center. They’ll help you with things like career planning, vocational skills assessment, retraining and resume and interview skills. You even could qualify to receive education funds.
Community colleges in some counties offer free education to some unemployed workers. Some of these colleges may give big price discounts on individual courses or programs of study.
Disabled persons and veterans also can find job training and placement assistance through the federal Veterans Rehabilitation and Employment (VR&E) Program.
Some states provide apprenticeship training programs that combine on-the-job experience with classroom instruction. Cooperative education is another way to obtain job skills. Here, students at participating colleges earn academic credit for private-sector work experience related to their career goals.

Losing Work Hours and Benefits

In this economy, people are losing work hours, if not always their jobs. That puts them on part-time status and can leave them without benefits. That’s a double blow–you lose income and have to pay more for things like health care services.
Let your lender and other creditors know this has happened, then try to work out alternate payment plans with them. If you might miss mortgage payments, make your lender your first call, so you don’t get any default notices.
Part-time work can take up some of the slack when your employer cuts back your hours and income. Here’s where employment search engines and job databases come in. There’s plenty of them you can browse, and http://unemploymenthandbook.com has a good list of these sites. Job fairs sponsored by your state labor department are another way to go, too.
Ideally, you want full-time work that can match or exceed the compensation you had before the cutback. Job search and executive search firms are good resources for finding this.
Cut expenses as much as you can to compensate for the income and benefits value you’ve lost. Luxuries and optional items can be pared back or eliminated. Some things on that list could include cable TV–or at least the pay cable channels; the land-line phone (if you mostly use your cell); vacation plans, subscriptions, and non-business club memberships of all kinds.
Food co-ops, if you have any nearby, can help lower your food bill. Join something like a Sam’s Club and save money by purchasing in bulk.
If you’ve lost the coverage you had as a full-time worker, where do you go for health insurance. One option might be individual insurance policies. You could qualify for this if you and your family members are generally healthy. Often, this is the best insurance value out there, with more dollar-for-dollar coverage than most group policies. Many pre-existing conditions will affect your eligibility, though. For more information, go to http://www.health-insurance-low-cost.net and click on the Insurance Plans link.
Other coverages, with their own pros and cons, may be available, too, like:

high-deductible policies, which require more out-of-pocket payments for routine medical expenses but shield you from catastrophic medical bills.
high-risk pools for people with health issues that could keep them from getting other kinds of health coverage. Most states have these pools, and premiums, coverages and eligibility will vary from state to state. You can find a list of participating states by going to MSN Money Search. Type A Survival Guide for the Uninsured into the search box, then scroll down to the section on high-risk pools and click on a list of state high-risk programs.
short-term coverage, where insurers can offer individual policies with a bridge or short-term option to cover you until you get a job that has insurance benefits. Usually these cost less than basic individual policies because the insurer is only paying claims for a limited time.
health insurance for kids, which is available on a free or low-cost basis in most states. If your state has such a program, http://www.insurekidsnow.gov/ has the information about it.

Maybe this is the time to consider a career change or build more knowledge for better, higher-paying positions in your current profession. Improving your job skills, or learning skills for a new occupation, can make you more attractive to prospective employers.
A great place to go for low-or-no-cost job training and placement is your state’s Workforce Development and Training Center. They’ll can provide you with things like career planning, vocational skills assessment, retraining, and resume and interview skills. You even could qualify to receive education funds.

Foreclosure-Prevention Frauds

Mortgage loan modification frauds are on the rise across the country. The culprits ask for huge upfront fees in return for arranging a loan modification or mortgage refinance. But they frequently do nothing, and skip with the money. Or they waste time in fruitless negotiations with the lender.
The scammers tell homeowners that free foreclosure-prevention services don’t have the staffing or financial leverage to get quick relief on the loan.
A rule of thumb is: never use a loan modification service that asks you to pay them in advance.
More good advice: don’t use services with names or symbols that resemble reputable federal or state foreclosure-prevention programs. You can get more tips on how to avoid these scams from http://www.mortgagefraud.org/ . Click on the Article Category and Index link, then scroll down to loan modification scams.

Burglary, robbery and foreclosure

It’s traumatic enough to find your home burglarized, or to be robbed in your home. If you lose money this way and can’t make mortgage payments as a result, your lender should know that as soon as possible.
File a police report about the crime right away. That documents the extent of your loss for a lender.
Residential burglaries and other property crimes increase during an economic downturn. And there’s a definite link between a rise in foreclosure rates and an increase in neighborhood crime. That’s partly because abandoned, unkempt homes attract criminal activity.
A pattern of criminal activity can hurt the value of your home and encourage foreclosure, too. Financially-pressed homeowners who must sell to avoid foreclosure may have a harder time finding a buyer.
Getting people together in a neighborhood watch program can make your street, and your home, less appealing to would-be criminals.

Getting Life, Finances Back to Normal

You’ve come up with a plan to avoid foreclosure, with the help of your lender and a housing counselor. The next challenge is staying out of trouble.
Live up to the terms of your loan workout plan, and keep your lender informed about what you’re doing to stay financially healthy.
Restoring credit is a big part of regaining financial health. That starts with spending less than you earn and putting away the credit cards. If you’re going to use plastic, make it a debit card. To show that you’re a good financial risk, get an unsecured credit card, use it and pay all charges on time.
Figure out what you can save on a regular basis and make that the foundation for a savings plan.
You met your goal of getting out of debt and avoiding foreclosure. Now you need another financial goal or set of goals as an incentive to spend wisely.
Then you need a spending plan that lets you reach that goal. The heart of the plan is a budget that sets spending priorities–and always leaves you with enough for your housing and health care, no matter what.
Divide your expenses into needs and wants. If the total is greater than your income, start sacrificing some of the wants.
You don’t have to cut out all indulgences. Just make them more modest. A Netflix subscription for movie rentals is less than live theater season tickets.
Track your spending with a system that’s comfortable for you. It can It can be a computer spreadsheet, an online program, specialized budgeting software, or even a pencil and yellow-lined pad.
You’re entitled to get one free credit report each year if you request it from a credit bureau. Review your credit reports from the principal credit reporting agencies to look for errors and the comments creditors are making about you. Do this at least once a year. http://www.aaacredit.net/ has a list of tips on how to repair your credit.
Build up your cash position to handle emergencies and unforeseen events.
With your financial plans now in place, keep track of your spending for a month to see if it fits into your budget. If you’ve spent more than you’ve budgeted, look at where you can cut out the excesses, and do that.
Carefully monitor your bank and credit card statements to make sure they’re correct. If there’s a problem, contact the bank or credit card company right away.
Finally, stay away from old spending habits. Be aware of expenses that seem to build and creep up on you without notice. That can happen with services you rarely use and pay little or no attention to. Remember to keep tabs on automatic deductions: even though you’re not writing a check, you’re still paying the bill.

THE BASICS TO KNOW

While the possibility of foreclosure is all too real to millions of homeowners today, there are basic steps people can take to keep their homes.

Locate your lender. Your monthly mortgage billing statement and payment coupon book has your lender’s name. The HOPE NOW alliance has lists with: 1) the website addresses of accredited home mortgage lenders; and 2) the main phone numbers for these lenders. Go to http://www.hopenow.com/# to find them.
Make your payments on time. Missing even one of them will put a homeowner in default and the lender can start foreclosure proceedings.
If you miss a payment, act promptly to fix the problem. Make sure your bank and mortgage payment records are up to date. Check to see that you haven’t been overcharged or double-charged by creditors.
If you think you’re going to miss a payment, take immediate action to prevent default. Pull together some data that your lender will want to know–things like your loan number, a list of household expenses, tax returns, recent bank statements, pay stubs and benefits statements. Be ready to explain why you can’t pay on time.
Then call your lender to discuss your problem openly and honestly. The sooner you do this, the more likely it is that you can avoid foreclosure. Talk with a mediator who is trained in foreclosure prevention and can help you arrange a repayment plan with your lender.
Develop a financial crisis plan for paying the mortgage. Work out arrangements with all your creditors. Think of ways you can find the money you’ll need–selling assets, working a second job, renting rooms in your home.
Come with a budget that gives top priority to health care and housing and eliminates, cuts or postpones some other expenses.
Call the HUD 800 number, 1-800-569-4287, to get the counseling you need to find the right foreclosure option.
Protect your credit. Pay all overdue bills and avoid taking on any more credit card debt. Work with your lender to find a repayment solution that prevents or gets your out of default. Obtain and closely examine credit reports from the major credit bureaus. Point out any errors to the reporting agencies.
Stay away from scam artists who promise to get your loan modified if you pay them upfront and keep your lender in the dark.
Home equity credit lines can give you a lot of money at low interest rates to pay off your creditors, but by using your house as collateral, they can expose you to foreclosure if you’re late or can’t you’re your mortgage payments.
Home equity loans may be a good option if you need to borrow a lot of money to consolidate high-interest debts. They have relatively low interest rates and don’t require you to have good credit.

PUBLIC- AND PRIVATE-SECTOR HELP TO AVOID FORECLOSURE

Homeowners may be able to get foreclosure-prevention help through the Obama Administration’s new homeowner relief programs; the Federal Housing Administration or the Hope Now Alliance. These measures make it possible to modify or refinance existing mortgage loans. Here are the basic details.

Loan Modification criteria

If you’ve missed one or more home loan payments – or even if you’re current but struggling to stay current – you may qualify for a Home Affordable Modification. This is part of the Making Home Affordable Program created by President Obama to help people who are struggling with their home mortgage payments.
Only your lender or loan servicer can tell you for sure if you qualify, but you could receive help if you meet the following criteria:

You have a single-family home that is your primary residence.
The amount you owe on your first mortgage is no more than $729,750.
You’re having trouble paying the mortgage for some reason. For instance, your monthly payment may have risen substantially or your income may have been cut sharply since you got the loan. Or, personal hardship, like a serious illness, has increased your expenses.
You got your current mortgage before January 1, 2009.
Payments on your first mortgage (including principal, interest ,insurance and taxes) are more than 31 percent of your current gross income.
You can make modified loan payments during a trial period of at least three months.

To get a Home Affordable Modification, you’ll usually have to show you have enough income to make reduced payments on time.

Refinancing criteria

If you’re up-to-date on your loan payments but can’t refinance your home because its value has dropped, you might quality for a Home Affordable Refinance. This is another aspect of the Making Home Affordable Program.
Again, only your lender or loan servicer can say if you’re eligible, but you could obtain refinancing if you satisfy the following conditions:

You own a home with one-to-four units.
You have a loan that Fannie Mae or Freddie Mac owns or guarantees.
You haven’t been more than 30 days late on any of your mortgage payments during the last 12 months.
Your mortgage balance is no higher than 105 percent of your home’s estimated current value.

To find out more about these loan modification and refinancing programs, go to the U.S. Treasury Department’s www.financialstability.gov website provided by the U.S. Treasury Department. You can also visit www.makinghomeaffordable.gov and click on the appropriate link.

Hope for Homeowners

The FHA’s Hope for Homeowners Program lets borrowers shrink their mortgage by refinancing with an FHA loan that’s worth 90 percent of the house’s appraised value. Loans of up to $550,440 are available.
By doing this, FHA gives homeowners 10 percent equity up front.
If you have a second loan on your home, the lender holding it has to release the lien against the home.
You can’t get a new second mortgage for five years, though, unless you have to make emergency repairs.

Hope Now Alliance

Mortgage servicers, trade associations and housing counseling agencies participate in this private-sector effort to modify home loans and adjust payment plans for hard-pressed homeowners.
This initiative brings borrowers and lenders together to work out loan terms that both parties can accept. Successful arrangements have included:

postponing missed payments until the end of the loan term;
short-term interest-rate reductions; and
extended repayment terms