Q I'm glad the housing market looks like it's on the upswing, but it doesn't help me. I'm desperately trying to avoid foreclosure on my home and I thank you for any advice you can give. - Harold Homeowner
A Dear Mr. Homeowner: First let me say I'm honored for your faith in my abilities. Yes, enjoy a lot of expertise in consumer matters. On the other hand, I must plead ignorance on certain questions, such as legal advice to help you keep your home.
With that said, I spent much time researching Tennessee foreclosure law to assist with my suggestion to apply for a loan modification. However, I urge you to seek the advice of an attorney ASAP to help with the legalities as I don't have a law school diploma. Loan modification conditions might include:
* You may be eligible for this plan if you've experienced a long-term income reduction or your monthly expenses have increased.
* You've been delinquent on the loan for three or more months, and the loan is more than a year old.
* You must be able to pay the modified rate/terms (obviously).
* The property must be in good condition. (In other words, if your son moved back home after college with his St. Bernard that eats woodwork and the two completely trashed the second floor, you might have a problem.)
Assuming you meet these guidelines, you're ready to talk to the lender. What hard copies must you provide this bank or mortgage company?
* Financial statement - The list should include expenses, such as food, credit cards, gas, and so forth, preferably listed in a spreadsheet. Calculate the average costs on each item for at least the past three months.
* Hardship letter - Don't write more than two pages and concisely specify why you're unable to continue the usual payments, obviously the reason why you need the modification.
* All necessary documents - The lender needs to review certain records, including pay stubs and bank statements for the past three months, W-2s for the past two years if you're employed (Form 1040 if self-employed), most recent mortgage statement, and property tax statements.
Once all paperwork is ready, contact the lender. You'll receive an information packet and a financial worksheet to fill out. Be sure to attach copies (never ever send originals) of your previous documents (listed above) before you return the packet.
Upon review and with any luck, the lender OKs this first step and offers you conditions. Once you accept the offer, the lender may put you on a "stop gap" repayment plan until you obtain final approval for the loan modification. After 39 days and proof you can afford the new loan amount along with your other expenses, you'll probably get final approval.
If you're unable to negotiate on your own, then it's a good idea to contact an attorney or a loss-mitigation specialist. If an attorney, any foreclosure action stops while he and the lender negotiate.
(To be continued next week...)
Ellen Phillips is a retired English teacher who has written two consumer-oriented books. Her Consumer Watch column appears on Saturdays in the Business section of the paper. An expanded version is at www.timesfreepress.com under Local Business. E-mail her at consumerwatch@timesfreepress.com.