Communication with lender key, counselor advises

Lynette Briggs is a counselor with the Dupage Homeownership Center, based in Wheaton.

About 12 families a month are requesting help in preventing foreclosure, she said. That is double the number from the center's previous fiscal year and perhaps four times what the center considers "normal."

In this edited version of an interview, Briggs offered advice to homeowners facing the possibility of losing their home to foreclosure.

Q. If it takes 10 months to complete a foreclosure, why do I need to act in the first 90 days after I miss a payment?

A. Bring that loan current or work out some sort of arrangement before that 90 days and you have avoided thousands of dollars of additional costs. Court costs, late charges, inspection fees add up. The biggest chunk is the attorneys' fees. One client owed $450 and had a bill for $2,700 worth of attorney's fees (from the lender).

Q. What's the most important factor in saving my house?

A. We can't do anything if someone can't afford the house, if they have no money. Here's a good scenario: I got laid off and missed two payments, didn't have enough income. Last month, I got a new job. I can handle the mortgage payment.

Q. Is bankruptcy a viable way to save my house?

A. Some people have filed Chapter 13 bankruptcy.

Each month you have to pay on the arrears with your mortgage and the lender's attorney fees as well as your regular mortgage payment. If one or the other is missed, the lender can petition to be dismissed from the bankruptcy and pick up the foreclosure where they were. In 11 years, I only remember one client actually completing a bankruptcy. You definitely need an attorney.

Q. What about refinancing?

A. Probably not. There are programs like Illinois Our Own Home that might work for a condominium. They take families with some blemished credit. But the limit is $208,500. I can't imagine a single-family home in our county priced under that. I wish I had other solutions.

Q. Can you really help?

A. About 45 percent of our clients over five years have brought the note current. With many families coming in I feel I've done nothing, but I actually clarified the time line. The client realizes: If I don't get a job by, say, December, I've got to put my house on the market. What is a realistic plan? If I make at least $4,000 a month that will be enough to cover my monthly payments, not enough to work out a payment plan. If I make $4,500, maybe I can go back to the lender and work out a payment plan.

Q. Do I have more chance of success with a counselor helping me?

A. You have to leave the emotions at the door when you talk to the lender's representative. It's actually very important that you as a borrower have communication with your lender. Don't hide from them. Ask for the loss mitigation department rather than collections. They have the more creative solutions. And ask for the name and number of the person you are talking to and the name and number of who you are being transferred to before you are transferred. I have been known to help draft the hardship letter. I have prepped clients and made sure they had all the paperwork in order.

Q. Will my lender take part of a payment?

A. Usually not. That would be postponing their rights. They don't have legal rights until you are 90 days delinquent. If you have money coming in, at least plan and save so you have cash to work with, even if you can't save the whole payment.

Q. Tell me some good news

A. FHA and conventional loans sold to Fannie Mae or Freddie Mac have standard loss mitigation or workout plans. It's possible the mortgage insurance company can basically do a partial claim and help out. That usually means a second lien is put on the house, and this is paid when the house is sold.

There is emergency help available from DuPage County. Maybe you could get a couple of principal and interest payments. This might just be enough to bring the loan current or make the lender happy enough to arrange a workout for the balance.

Q. If no one will buy my house for the amount of the mortgage, will the lender accept less in what is called a short sale?

A. They will actually accept what's coming out of the sale. Usually the lender is going to suspend action while you pursue this. They hit the pause button and give you a certain amount of time to get a contract.

Q. Obviously in a short sale my equity is gone. What's in it for me?

A. If you took an action, it's a positive step even in a terrible situation. It's going to be a more positive statement in the future if you want to buy a house again.

Q. What about my sub-prime mortgage?

A. Subprime loans don't have traditional protections like mortgage insurance. There are agreements when they package them into pools that restrict what servicers can do in the event of a default. It's important to know who really owns the loan.

Q. Isn't there an FHA plan to refinance sub-prime mortgages?

A. FHA Secure allows someone in a subprime loan to refinance into an FHA loan. But it's very narrow. It was the reset or adjustment of the loan that put them into default, and prior to that they were paying on time. The lending limit is $275,200. A lot of people owe more. It might work, but I don't think it's going to be a solution for many families.

Q. When can I hope to buy a house again?

A. The general rule of thumb is that you need to re-establish credit for two years after a bankruptcy has been paid off or a short sale, and three years after a foreclosure.

Q. If I don't live in DuPage County, where do I turn for help?

A. Find an approved counselor at www.hud.gov or call (800) 569-4287.