By Karen Templeton
MSU Ag Communications

MISSISSIPPI STATE – An increase in mortgage foreclosures is spreading fear among homeowners who have suffered a loss of income, but falling behind on payments does not necessarily mean they must give up their homes.

There are many circumstances that can lead to homeowners not being able to make their mortgage payments, such as job layoffs, divorce or death of a spouse. In an uncertain economy, any of these circumstances can be an even more serious blow to families who are struggling to make house payments.

Bobbie Shaffett, family resource management specialist with the Mississippi State University Extension Service, said homeowners should not panic when faced with the inability to make their monthly house payments.

“The natural reaction is to panic or avoid the situation, but those responses will only make a bad situation worse,” Shaffett said. “The best course of action is to remain calm and carefully examine the many available options.”

The first step to preventing home foreclosure is for homeowners to immediately notify their lender if they are unable to make a payment on time.

“Calling when you are going to be few weeks late is better than calling when you are months behind on your payments,” Shaffett said. “Homeowners fear that if their bank knows they are going to be late, they'll foreclose on the property. That isn't the case; foreclosure is not in the best interest of lenders. It costs them up to half of the loan balance each time they write off a foreclosure.”

Sherry Rainey, president of Consumer Credit Counseling Service of Mississippi, agreed.

“If you let your lender know you are having problems, you are giving them an opportunity to help find a solution. Initiating contact with a lender also demonstrates a homeowner's commitment to meeting his or her financial obligations,” Rainey said.

Lenders may develop a new agreement for missed payments. Shaffett provided options homeowners may want to discuss with their lenders:

*Forebearance – A delay in making payments for a short period may be offered with the understanding that another option will eventually be used to make up for missed payments.

*Reinstatement – The lender may accept a lump sum to be paid by the homeowner by a specific date.

*Repayment plan – An agreement that allows homeowners to catch up on missed payments by adding a portion of the past due amount to each current monthly payment.

*Mortgage modification – The lender may modify the mortgage to extend the length of the loan.

If catching up on payments is not possible, then lenders will, in some instances, put foreclosure on hold and give the homeowners time to attempt to sell the property. Another option is to give the property back to the lender, but this may negatively impact credit scores.

Shaffett encouraged homeowners to take advantage of services offered by reputable non-profit organizations.

“Many non-profits offer free advice from certified housing counselors and are dedicated to helping homeowners make informed decisions,” Shaffett said. “They help people avoid scams from predatory lenders and navigate through difficult situations.”

The Homeowners HOPE hotline, available at 888-995-HOPE, is a non-profit network certified by the U.S. Department of Housing and Urban Development. Consumer Credit Counseling Services of Mississippi is a member of the Homeowners HOPE network and can help with foreclosure prevention, Rainey said. When Mississippians call the HOPE hotline, the calls are routed to certified housing counselors who can provide guidance and assistance related to mortgage repayments and pending foreclosures.

“The first thing our specialists do is help clients diagnose the problem, and from there we can walk them step by step through developing a plan of action,” Rainey said. “We are available to call lenders with clients to provide assistance with negotiating payment plans. If clients would rather call their lenders on their own, we can be on standby to later review the options the lenders provide.”

After a payment plan is negotiated, specialists also will help clients get a better sense of their spending habits and budget, Rainey said.

“It benefits homeowners to understand their needs versus their wants. Tightening the belt by cutting back on dinners out and gourmet coffee every morning can really pay off,” she said. “Some simple budgeting can be key in preventing foreclosure.”

Shaffett and Rainey both encouraged homeowners, even those not in a mortgage crisis, to pay close attention to their budgets and spending habits.

“Taking stock and prioritizing expenses can protect families from getting to the point of being in an emergency situation,” Shaffett said. “Always make the most of available resources and never be afraid to ask for help.”