There’s an interesting article at the New York Times about how a record number of churches are facing foreclosure as the credit crisis seizes every sector of American life. During the real estate boom many churches took advantage of easy credit and expanded. Banks, eager to cash in lent money based on the hope that church membership would grow and as a result donations. But now with a financial crisis, homeowners facing foreclosures, job losses and personal bankruptcy many church members are giving less and hundreds of churches across the country are knee-deep in debt and facing foreclosure.

According to the article:

Historically, churches were wary of debt, and many old-line congregations have owned their buildings free and clear for decades. But borrowing by churches became more common in the 1990s, reaching $28 billion nationwide in 2006, including mortgages, construction loans and church bonds, according to Lambert, Edwards & Associates, a consulting business in Grand Rapids, Mich. New companies and nonprofit organizations focused on church lending sprang up, as did real estate investment trusts and other bundles of church loans, which were sold to investors.

They bundled church loans and sold them to investors and we wonder why these financial "powerhouses" are facing bankruptcy and many homeowners (and apparently churches too) are facing foreclosure. Since when did church loans become big business in the eyes of the financially savvy? Already, 254 churches have been foreclosed on and the numbers of foreclosures are predicted to increase with at least 25% of all churches holding mortgages on their properties. I wonder how many of these church loans are toxic, subprime or adjustable rate mortgages? It is definitely a sign of the times when religious congregations are being evicted from their churches.

Drowning in debt and struggling with looming foreclosure, many homeowners in slumping markets such as Dallas-Fort Worth are looking to bankruptcy to help them rebuild their financial lives. Many debtors facing foreclosure or other urgent debts delay bankruptcy because they fear the impact it will have on their credit score. Well the truth of the matter is that if you’re behind on your bills your credit score is already taking a serious hit and reducing your chances of getting credit. Allowing your home to go into foreclosure can sink a good credit score by more than 100 points. But with bankruptcy, your credit score may actually increase afterwards because of the debt balances showing $0. Some creditors may be more willing to lend to a debtor who has filed bankruptcy than someone in foreclosure because they know that it is not possible for you to file bankruptcy again for a number of years. Remember, as the economy is going through a serious crisis, you aren’t alone in facing financial difficulties and filing bankruptcy. Millions of Americans are filing bankruptcy every year simply because the current economic circumstances call for bankruptcy in many financial situations.

As the government hands out bailout money we need to make sure that credit is still available to those who have filed for bankruptcy and/or gone through a foreclosure. This is critical to restoring the health of the economy which is based on the consumer’s access to and responsible use of credit.

The Dallas Morning News reports that many homeowners who are otherwise financially healthy are finding themselves in a nasty financial predicament that may lead to foreclosure. Their life circumstances have changed and they need to quickly sell their home and downgrade to something more affordable or move to another city for a job. But as we all know many homeowners are facing foreclosure because of the slumping real estate market which makes finding a home buyer kind of like finding a needle in a haystack. But many homeowners aren’t just waiting around for the foreclosure axe to fall; they’re swapping their homes with others.

How House Swapping Works

Two “buyers” basically purchase each other’s homes on the same day. They each bring their own financing and pay off the other homeowner’s mortgage completely. This arrangement may benefit those who have decent credit; but are on the verge of a
foreclosure because a) their mortgage is about to reset b) the mortgage has already reset or c) the need to sell their home because they must move for a job or other necessity. In these cases house swapping could help a homeowner with decent credit avoid a foreclosure by finding someone to swap homes with.

For those whose credit is less than stellar, house swapping may not be ideal because of the increasingly stringent requirements for getting loans. If your credit is sub par and you are facing an inevitable foreclosure because you can no longer afford your home; but can’t sell it because of the housing market, speak with a bankruptcy attorney about your bankruptcy options.

Some members of Congress are urging the Federal Housing Financing Agency (FHFA) to quickly implement reforms made to protect renters’ rights during a foreclosure. As part of the $700 billion Emergency Economic Stabilization Act, which was passed in October, Fannie Mae and Freddie Mac (and other government entities) are required to allow renters living in foreclosed properties to remain in their homes until their leases end as long as they continue to pay their rent. But according to housing activists, Fannie Mae and Freddie Mac have not been adhering to this rule regarding foreclosures and renters, and are evicting renters in violation of the new policy. Freddie Mac and Fannie Mae deny this accusation.

This bailout was designed to help all those people affected by the crisis, including renters living in foreclosed properties. The fact that Freddie Mac and Fannie Mae are allegedly evicting renters in foreclosed properties is a travesty and a slap in the face of taxpayers. Dallas-Fort Worth needs to make sure that renters living in foreclosed properties owned by Freddie Mac or Fannie Mae are allowed to remain in these foreclosed properties according to the law. There needs to be stiff penalties for illegally evicting renters living in foreclosed properties and systems in place that give renters the power to fight evictions caused by foreclosure.

Around the country, state and local legislators are considering foreclosure moratoriums for homeowners facing foreclosure. We all know that homeowners facing foreclosure need more time than they’ve been given to put their financial house in order and save their homes; but that’s not all they need. Oftentimes foreclosure moratoriums end up only delaying the inevitable foreclosure because once given more time many homeowners don’t have the information or tools necessary to take the critical steps needed to save their homes.

When a state or local government issues a foreclosure moratorium, there should be a plan already in place to help vulnerable homeowners act quickly to save their homes. The first step in the plan should be providing every homeowner with information about their options. The legislative bodies issuing the foreclosure moratorium should have that information disseminated through the mortgage companies as part of the homeowner’s monthly bill/statement.

The second part of the plan should be to evaluate each homeowner facing foreclosure to figure out which option is best for their situation. If someone is only slightly behind in their mortgage payments, has a steady income, very little debt, and is only having trouble because of a toxic mortgage, issuing a new and affordable loan for this homeowner may be the best option. On the other hand, if a homeowner has little or no income, is severely delinquent in paying their mortgage and has large amounts of other debt, bankruptcy may be their best option. Whatever option homeowners facing foreclosure chose, it is important that they know all of their options and are given enough time to take action.

As more Texas homeowners face foreclosure many are falling victim to a variety of foreclosure scams. These foreclosure scams offer big promises and deliver very little while siphoning off homeowners’ limited resources. To strengthen laws designed to protect homeowners from foreclosure scams, Attorney General Greg Abbott and Senator Craig Estes are proposing a new law called the “Foreclosure Rescue Fraud Prevention Act.” This law would require that “foreclosure prevention consultants” provide customers with a written contract detailing the services they will provide to prevent foreclosure. The law would also require a written disclosure statement advising customers to contact an attorney or housing counselor before signing mortgage rescue agreements. If the law is violated by “foreclosure prevention consultants,” prosecutors could obtain civil penalties under the state’s deceptive trade practices act.

This legislation is badly needed in the Dallas-Fort Worth area as many homeowners facing foreclosure find themselves vulnerable to the empty promises of “foreclosure rescue companies.” Many homeowners facing foreclosure expend lots of money trying to save their homes using these scams. This type of legislation which hold “foreclosure rescue companies” accountable is long overdue.

Despite mortgage companies efforts to streamline and speed-up programs designed to avert foreclosure, Texas homeowners are quickly running out of time due to the state’s fast-track foreclosure process. In other states, foreclosure can take as long as four months; but Texas’ foreclosure process can take as little as 41 days to complete. That’s the quickest foreclosure process in the country. Current foreclosure laws in Texas only give homeowners 20 days to pay off the default balance of their mortgage and avert foreclosure. The state Attorney General Gregg Abbott plans to introduce legislation next week that could double the amount of time given to homeowners facing foreclosure. If the new legislation is approved it would give homeowners 45 days to fix their mortgage problems and avoid foreclosure.

The short amount of time given to homeowners facing foreclosure is probably the main reason Dallas-Fort Worth has one of the highest foreclosure rates in the country. The bottom-line is that 20 days is not enough time to fix a foreclosure issue, especially when trying to renegotiate the terms of a subprime mortgage. By the time many homeowners have received new loans, the foreclosure process has already started.

According to a report released by The Mortgage Bankers Association, Texas is one of 10 states with the most delinquent mortgage payments. More than one in 10 mortgage holders in Texas are facing foreclosure. According to the report, this last quarter revealed that 8.41 percent of homeowners in Texas were at least one month behind on their mortgage payments and 2 percent of Texas homeowners were already in foreclosure. Nationwide 6.99 percent of homeowners were delinquent paying their mortgages and faced possible foreclosure.

The root of the problem is that the subprime mortgage business was big business in Texas during the real estate boom, especially in Dallas-Fort Worth. Now those homeowners are facing job losses or reduced wages and finding it hard to pay those toxic mortgages, forcing them into foreclosure. In the Dallas- Fort Worth area alone, more than 50,000 home foreclosure filings were recorded for 2008 and that’s only the beginning. What we need now is a comprehensive plan to make it easier for struggling homeowners facing foreclosure to keep their homes, using bankruptcy or other programs designed to stop foreclosure.

On Thursday, Federal Reserve Chairman Ben Bernanke pleaded with the government to do more to stop the foreclosure crisis. It is estimated that lenders are preparing to foreclose on 2.2 million homes this year, that’s twice as many homes in foreclosure than the pre-crisis period.

Bernanke offered several plans that the government could follow to stem the foreclosure crisis. Here are summaries of a few…

1. Make the "Hope For Homeowners" program available to more homeowners facing foreclosure by easing the terms of the program.
2. Lower lender’s upfront insurance premium and reduce the interest rate borrowers pay, which is currently 8 percent.
3. Lower interest rates so that homeowners facing foreclosure are not using more than 31% of their income to pay their mortgage.

Bingo! Number 3 is a winner! This is where the problem began. Homeowners facing foreclosure are now paying TOO much of their income for housing. This is why any little emergency or financial crisis puts these vulnerable homeowners into foreclosure. When a homeowner has little or no financial wiggle room because they’re paying 40% or even 60% of their income for a mortgage, foreclosure is not just a possibility, it’s inevitable.

On November 28, 2008 the Dallas Federal Reserve featured information about the Texas Foreclosure Prevention Task Force which was setup to provide homeowners with a national and bilingual hotline (1-888-995-HOPE) to provide advice on how to deter foreclosure. The hotline is available around the clock 24/7 and is free. The foreclosure prevention taskforce is comprised of representative from over 50 state, local and federal organizations. The foreclosure taskforce states that it is NOT designed to provide callers with grant or rescue funds, specific loan modification products or general information about how or where to qualify for a rate freeze; but will help "establish communication with a loan providers," "help create a homeowner budget" and provide the homeowner with "credit counseling" resources.

This seems like a good resource for homeowners facing foreclosure who are not knowledgeable about the processes available to them for preventing foreclosure. But today’s economic environment is NOT filled with those types of homeowners the majority of the time. What we are facing today is an environment where homeowners facing foreclosure simply do not make enough money to cover their basic needs and this includes shelter. These homeowners are facing foreclosure because of joblessness, toxic mortgages and life emergencies and they are often times facing imminent foreclosure on their homes and time is of the essence. If this foreclosure prevention taskforce is to be fully effective, they need to at least provide information about how to get "rescue funds, loan modification, rate freezes" and YES how to use bankruptcy to stop foreclosure.

Over $800 billion went to bailout some of the wealthiest companies in America, including many mortgage companies; but still foreclosures continue to rise throughout Dallas-Fort Worth. The bailout was supposed to loosen the credit crunch and provide more affordable mortgages for those facing foreclosure; but many Dallas-Fort Worth homeowners are still under the foreclosure axe despite their best efforts. According to the WFAA TV, 88 year old Florine Barrow and her son who are 3 months behind on their mortgage, have been trying to negotiate a deal with JP Morgan Chase but haven’t made much head way in avoiding foreclosure. Despite making current payments on the mortgage, JP Morgan Chase seems to be stuck, unable to strike any kind of deal in time to save the home from foreclosure. Barrow and her son say they will give it their best shot; but if they can’t strike a deal with the mortgage company they will file for bankruptcy on Monday.

Good choice. Many mortgage companies are putting forth a good effort to save homeowners from foreclosure; but some of them are just simply overwhelmed. The new programs designed to stop foreclosure are just that, "new" and often slow to work on the homeowners behalf. No homeowner should waste too much time trying to apply for these programs. If the clock is ticking and foreclosure is just around the corner it is best to visit a bankruptcy attorney and file for Chapter 7 or Chapter 13 bankruptcy to save your home before it’s too late.

Existing home sales, which make up 90% of the U.S. housing market, dropped 3.3% in October and prices plunged 11.3%, the biggest drop since the National Association of Realtors group began collecting data in 1968. Over 10 months of unsold housing inventory clogs the housing pipeline, and that’s not including homes slated for foreclosure. The large number of homes unable to sale, plus the number of homes facing foreclosure only add to the already shaky housing market. These figures show us that the credit squeeze is taking a serious bite out of the housing market and may even be forcing otherwise financially healthy homeowners into foreclosure.

Many homeowners who see financial trouble on the horizon attempt to sell their home before foreclosure becomes imminent. But when the housing market is so tight that it takes 10 months to a year to sell a home, homeowners who would otherwise be financially stable, may face foreclosure because they can’t continue to pay the mortgage and they’re unable to sale the property.

Fannie Mae and Freddie Mac announced that they are suspending foreclosures for nearly 16,000 households during the holiday season. Homeowners who have mortgages with Fannie Mae or Freddie Mac and are facing foreclosure can expect a short reprieve between make November 26 and January 9, while the two mortgage companies evaluate whether borrowers facing foreclosure qualify for their new loan modification program. This temporary suspension of foreclosure proceedings only applies to borrowers who are currently occupying their homes, vacant homes will not be spared.

Well, this just goes to show us that some companies actually do have a soul. Stressed homeowners facing foreclosure will at least not have to worry about being foreclosed on during the holidays. That extra month and a half can also give those facing foreclosure the opportunity to consider bankruptcy as an option to permanently stop the foreclosure process and remain in their home.

Dallas-Fort Worth city officials plan to use $6.2 million in federal funds to help people buy foreclosed homes in areas that have been hit the hardest by the foreclosure crisis. The money will come from the U.S. Department of Housing and Urban Development’s Neighborhood Stabilization Program, and will target areas with high rates of foreclosures and subprime mortgages, mainly outside Loop 820. Dallas-Fort Worth has had 3,780 foreclosures since September 2007 and officials plan to loan to money for buying those foreclosures directly to borrowers in $20,000 increments. If the borrowers stay in the foreclosed home for at least five years, the city will forgive the balance of loan. Half of the money in the special fund will be loaned to low-income families making less than $32,300 a year for a family of four while the rest will be loaned to people making up $77,500.

"Our goal is to get more property into the hands of homeowners," said Jerome Walker, the city’s housing director.

I think this special foreclosure loan program is a great idea; but just one question…who will oversee this process so that borrowers aren’t given toxic mortgages (again) and repeat the cycle of being foreclosed on? I understand city officials want to reduce the number of vacant properties in Dallas-Fort Worth and I commend that; but the root of our current foreclosure problem is that debtors are entering into loans with unreasonable terms and loan amounts that aren’t affordable for their budget. I hope we don’t repeat the same mistakes with this foreclosure loan program.

Fannie Mae and Freddie Mace are launching its most radical program ever December 15 th, in an effort to save hundreds of thousands of delinquent homeowners from foreclosure. The program will allow delinquent homeowners to renegotiate their loans facing foreclosure through an accelerated process. Fannie Mae and Freddie Mac own or guarantee nearly 31 million U.S. mortgages or 6 out of every 10 mortgages in the country. But of that number, officials are not sure exactly how many homeowners facing foreclosure will qualify for the program. To qualify, borrowers facing foreclosure must be at least 3 months behind on their mortgage payments and must owe at least 90% or what the home is currently worth. The program is only designed for borrowers who actually live in the home as their primary residence. Investors and landlords would not qualify under this program. The renegotiated loans will offer two solutions for delinquent homeowners facing foreclosure, 1) a reduced interest rate so that borrowers would not pay more than 38% of their income on housing expenses and 2) an extended 40 year mortgage with some of the principal deferred without interest.

It is about time that the mortgage companies step-up the pace in their efforts to stop foreclosures. The foreclosure process is so fast that many homeowners don’t have time to save their homes through these special programs that are often slow with tons of red tape. Hopefully, this new program will make a difference for thousands of homeowners slated for foreclosure.

Texas Attorney General Greg Abbott is proposing that mortgage loan servicers be required to give homeowners 45 days to fix a loan default before the home is put up for foreclosure auction. Currently the law only gives homeowners facing foreclosure 20 days to fix a loan default. But if Attorney Abbott’s proposal is approved, mortgage lenders would have to prove that they made legitimate attempts via phone or in person to contact the homeowner before filing for foreclosure. The proposal would also give homeowners 30 days to vacate the foreclosed property.

Attorney Abbott’s proposal is the kind of aggressive action needed to tackle the foreclosure crisis. Homeowners need to be given enough time to find remedies to their foreclosure. Twenty days is not enough time for a homeowner facing foreclosure to find solutions to their foreclosure problem. Programs designed to stop foreclosure, such as Hope For Homeowners takes time to apply to and wait for approval. A 45 day waiting period is not too much to ask of mortgage lenders.

On October 1, 2008 the government launched Hope for Homeowners; but the program designed to help as many as 400,000 struggling borrowers facing foreclosure seems to have fizzled out. In the plan’s first month fewer than 100 homeowners facing foreclosure applied to the program and now the Federal Housing Administration has pulled back its ambitions and projects that only about 13,300 homeowners facing foreclosure will benefit from the program in 2008. But that’s not all, many homeowners who apply for the plan in an effort to avoid foreclosure will actually be ineligible for the program. According to the FHA, only 1,200 out 23,000 will actually be eligible for the program designed to avert foreclosure.

Hope for Homeowners was designed to help borrowers facing foreclosure by restructuring their mortgages and creating more affordable payments. But the problem has been that in order for troubled borrowers to participate, mortgage lenders must accept the new terms which states that the new loans cannot exceed 90% of the home’s value. Anyone who has even slightly aware of the current real estate market knows that these homes are worth far less than the mortgages homeowners are paying. Creating new loans which are no more than 90% of the homes’ "true value" cuts into mortgage lender’s profits. Most mortgage lenders don’t want to cut into their profits. What motivation do these lenders have to participate in this program and avoid foreclosure? Very little motivation, this is why this program has failed miserably at reducing foreclosure. Many of these homeowners would be better off filing for Chapter 7 or Chapter 13 bankruptcy and saving their homes while protecting other assets.

North Texas home sales fell 17 percent from October 2007, nudged down by job losses, the credit crisis and rising foreclosures. October’s decline in home sales is one of the largest for 2008 and coincides with the foreclosure crisis. Only 5,500 previously owned homes were sold in North Texas last month according to the North Texas Real Estate Information System and Texas A&M University’s Real Estate Center. This does not include hundreds of foreclosed homes being sold at auction.

Home prices have also taken a tumble, falling 3% in one year. The current median home price is now $140,000 in the North Texas area, that’s down from an all-time median price high of $158,000 in 2007. The time it takes to sell a home is slowing significantly as it now takes on average 82 days to sell a home in North Texas.

With the values of homes declining, many homeowners are removing their listings hoping to see a return to high house values and quick sales at some later date. Others have succumb to foreclosure as their credit lines shrink and they’re forced to pay cash for everyday expenses and their inflating mortgage. In this economic environment where home values are declining and properties are selling slowly or not at all, homeowners facing foreclosure can’t hope to avoid the chopping block by selling their home.

JPMorgan Chase, who received $25 billion through the U.S. Treasury Department, announced that it will not initiate foreclosure on any more homes for the next 90 days while it executes a plan to help borrowers save their homes. Chase plans to offer refinanced mortgages to homeowners in toxic loans and facing foreclosure. They will hire 300 loan counselors and 150 workers to review mortgages and make sure they are offered loan modifications before being placed into foreclosure. Chase’s new plan could help over 400,000 homeowners with $70 billion in loans. Chase will offer homeowners with payment option ARMs such as 30 year fixed-rate loans with affordable payments, principal deferral and interest-only payments for 10 years. Chase will also offer 500 discounted or donated homes to community groups, nonprofits and government programs.

The number of the religious and community groups pushing lenders to renegotiate troubled loans so homeowners can avoid foreclosure is growing. PICO National Network, based in Oakland, California, says it is working with hundreds of families in California facing foreclosure and plans to help as many as a million homeowners avoid foreclosure nationwide.

PICO will join over 500 clergy and community leaders from around the country to meet with representatives from Wells Fargo & Co., Bank of America Corp. and the Federal Deposit Insurance Corp in a bid to stem the nationwide wave of foreclosures. Many non-profit groups are joining forces as the housing market continues to crash and foreclosures rise around the country.

According to an article on CNN Money over 851,000 homes have been foreclosed on by lenders since August 2007. Another 265,968 borrowers received foreclosure filings in September and although that’s a 12% drop from the record high in August, it is a 21% increase in foreclosure filings since September 2007. That’s bad news for the U.S. housing market which is being flooded with bank-owned property which is in turn pushing down home values to record lows. This rapid devaluation of the housing market is contributing to the rising foreclosure rate. If this trend continues, by the end of 2008 nearly 25% of all homes for sale in the U.S. will be owed by the bank. It’s a nasty formula that we’re facing. Lower home values equals more foreclosures as more and more borrowers rapidly lose equity in their homes.

The two presidential candidates Senator John McCain and Senator Barack Obama both agree that the current foreclosure crisis demands an immediate fix; but they disagree on exactly what is the right plan of action to stem the tide of foreclosures.

McCain proposes that homeowners facing rapidly declining house values and possible foreclosure could apply for a government-backed FHA loan; but only if they can prove their creditworthiness. The new loan would be for the current value of their home, forgiving any negative equity.

Obama also proposes mortgage restructuring designed to prevent foreclosure, but says that the Housing and Urban Development group should work with current lenders. He proposes a 90-day foreclosure moratorium and $25 billion in aid to states and cities in order to avoid property tax increases which could exasperate the foreclosure crisis.  He would also change the bankruptcy code to allow judges to restructure primary home loans and reduce the risk of future foreclosure.

Whoever your candidate may be, we can all agree that something needs to be done to help homeowners avoid foreclosure. Both plans thankfully address homeowner needs. McCain’s negative equity forgiveness and Obama’s 90 day moratorium on foreclosures is something homeowners need today not tomorrow.

Facing the prospect of losing a home to foreclosure can put the best of us under extreme stress and pressure, causing us to grasp at any straw to save our biggest investment. That’s why with the rise in foreclosures, one of the fastest growing scams in Texas targeting distressed homeowners is the "foreclosure rescue" scam.

How It Works

Scammers target homeowners with equity in their homes who are facing foreclosure. The scam comes in several strips.

1. Fake Counseling - The scammer offers useless counseling on how to save your home for a fee, which they pocket. This scam may also require you to give the scammer your mortgage payments while they negotiate with the lender. The payments never make it to the lender and the scammer disappears.
2. Bait & Switch - This scam involves you signing your home’s title over to the scammer under the guise of receiving a "rescue loan."
3. Rent-To-Buy Scam - The scammer convinces the homeowner to sign over the title of their home to the "foreclosure rescue" company under the pretense that the original owner can eventually buy the home back after paying the scammer rent for a few years. Unfortunately this doesn’t happen as the scammer raises the rent and eventually evicts the original owner and sells the house, pocketing the profits.
4. Bankruptcy Scam - The scammer charges the homeowner a fee for negotiating with the lender or getting refinancing. The scammer never speaks with the lender, instead they pocket the fee and secretly file bankruptcy under the homeowner’s name, which will temporarily stop the foreclosure. But if the homeowner does not show up to the bankruptcy hearings (because he/she doesn’t know about them) the case could be dismissed and the home could go into foreclosure anyway.

The best way to avoid becoming a victim of these scams is to have an attorney review any documents before you sign them.

According to an article in the Dallas Morning Newsnearly every Dallas-Fort Worth neighborhood has been hit by the foreclosure crisis. But the largest numbers of foreclosures seen in the first six months of this year were in ZIP codes 75115 – which includes most of DeSoto – and 75052, Grand Prairie. Many of these homes are located subdivisions where people who purchased homes cheaply now cannot afford the daily commute because of skyrocketing fuel prices and because of the slow housing market are unable to sell.

But we are yet to see the full fallout from the foreclosure crisis hitting the Dallas- Fort Worth area. Many of the homeowners who purchased a few years back took out adjustable rate mortgages (ARMs) because they could not afford the high property price tags at the time. Many of those loans are scheduled to reset this year. With job losses mounting and the value of homes dropping as much as 30% in some areas, many homeowners holding ARMs may choose to file bankruptcy or surrender their home to foreclosure.

More than 42,000 Dallas-Fort Worth area homes have gone on the foreclosure auction block since January 2008, up more than 35% from 2007, according to the Dallas Morning News. This is a new record for Dallas-Fort Worth. But despite the rise in foreclosures, the market remains unstable with only 40% of the homes being sold after they go to auction.

There seems to be an unusual surge of homes going into foreclosure as we end out 2008. Why? Many people are experiencing multiple financial blows as the economy goes through major corrections in the housing and financial markets. Many individuals are experiencing job losses, resetting mortgage interest rates, they then fall behind on their debt payments and sometimes their mortgage payments. Because the housing market is soft, individuals trying to sell their homes to stop the financial bleeding and restore cash flow, find that their homes sit on the market even at deep discounts. Unfortunately at this point many of those struggling financially don’t take any meaningful measures to fix their finances such as filing a Chapter 7 or Chapter 13 bankruptcy and eventually they succumb to foreclosure. That’s the picture, it’s not pretty; but it’s the truth.

The Housing and Urban Development (HUD) has a special forbearance initiative known as HUD Special Forbearance Initiative which permits lenders of Federal Housing Administration (FHA) insured mortgages to assist creditworthy homeowners who are behind in making mortgage payments because they are temporarily unemployed.

To be eligible, the mortgage must be an FHA insured mortgage and the homeowner must:

1. Have a good payment record and a stable employment history prior to this default
2. Have a verifiable loss of income or increase in living expenses
3. Be actively seeking employment, but have not received a commitment of re-employment at the time the lender is reviewing the homeowner’s financial information
4. Be an owner-occupant, committed to occupying the property as a primary residence during the term of the special forbearance agreement; and
5. Not have repeatedly broken past informal or formal forbearance plans without good cause.

Under this initiative, a lender may enter into a written special forbearance agreement with a homeowner whose FHA insured mortgage is at least three, but not more than 12 months overdue, and whose loan is not in foreclosure at the time the agreement is executed.

Under this initiative monthly mortgage payments can be postponed for a minimum of four months. While there is no limit on the maximum number of months, at no time may the agreement allow the delinquency to exceed the equivalent of 12 monthly principal, interest, taxes and insurance installments. The lender will verify the homeowner’s employment status monthly and renegotiate the terms of the special forbearance plan when the employment status changes. The lender will also verify that the property has no physical conditions that might adversely impact its continued use or ability to support the debt. Homeowner will not be able to obtain a special forbearance if the property is in such a deteriorated condition that repairs drain his monthly resources.

In every disaster there are those who look for opportunities to take advantage of the vulnerable. Foreclosure brings out scammers looking for opportunities.

When you are facing foreclosure and looking for help to avoid foreclosure, you need to be careful. There are many out there just waiting to pounce upon you and take advantage of your misfortune. They advertise themselves as foreclosure rescuers or experts. Before you can realize what’s happening, they will acquire your home for a fraction of what it would have brought at sale. Sometimes they will transfer your title into a trust enabling them to rent or resell your property to other unsuspecting buyer while you remain legally bound to make the mortgage payments. The mortgage company is unaware that anything is amiss and you are left on the hook to pay the mortgage on a house you no longer own.

There are mainly three categories of foreclosure rescue scams- The Phantom help, The Bailout and The Bait and Switch.

In Phantom Help, the so called rescuer will charge out outrageous fees for light-duty phone calls or paperwork you can easily do. None of these phone calls or paperwork actually results in saving your home. It just gives you a false sense of hope and prevents you from seeking qualified help.

In bailout, the rescuer deceives you into signing over title with the belief that you will be able to remain in the house as a renter and eventually buy it back over time. The actual terms are so onerous that the buy-back becomes impossible, you loose possession and the rescuer walks off with most or all of the equity.

In bait-and-switch under the guise of making you sign documents to bring your mortgage current, the rescuers will make you surrender you ownership. They will do this in such a way that you will not realize that you have been scammed until you are evicted.

Scammers approach homeowners in many ways including a straightforward phone call or flyers and brochures being left of the door and even a knock on the door. Some of the scammers are well organized and advertise in the newspaper classified and on the web. Some even have their own websites.

When you are faced with foreclosure, you do not have much time on hand. This can lead you to make hasty decisions without consulting others. Scammers almost always highlight the lack of time and insist that you take decisions. They then pressurize you and get a quick signature on the unread and fraudulent documents.

The initial contact typically revolves around a simple message and frequently contains a “time is of the essence” theme, adding a note of urgency to what is already a stressful and possibly desperate situation. Once you fall for the trap and decide to move forward with the rescuer, you will be promised a fresh start at the initial meetings and they may also provide you with testimonials of other homeowners who they claim to have rescued. They will then instruct you to cease all contact with your lender and allow them to take over. When you cease call contact with your lender, it can be dangerous. It cuts off access to your options and you run out of time to prevent foreclosure. By the time you realize what is happening, you are already conned.

Scammers will do everything to cut off a homeowner’s access to correct information. Scammers will win the homeowner’s trust and warn the homeowner to stay away from attorneys and counseling agencies on the grounds that the attorneys and agencies are out to make money from the homeowner’s misfortune.

Once it is too late to save the home, the property is either taken by the scammer or, having been drained of substantial equity through the scammer’s imposition of heavy fees and other charges, simply lost to foreclosure. Many homeowners are then summarily evicted by their “rescuer” from the home they once owned.

You can successfully challenge the foreclosure by:

• Suing to Enjoin Foreclosure before It Occurs
• Suing to Set Aside a Foreclosure that Has Already Taken Place
• Filing for Bankruptcy

In certain states, you can obtain an injunction by filing a complaint in a court. You will need an attorney to do this. The process is made more arduous by a requirement that you give five days’ notice to the lender before seeking to enjoin the foreclosure.

You can file a compliant in a court and obtain an injunction. Based on your state laws, you may be required to give notice to the lender before seeking to enjoin the foreclosure.

You must show an immediate and irreparable injury, loss or damage or that the acts or omissions of your lender will tend to render the final judgment ineffectual. You may be required to give a bond in such sum as the court deems proper.

You can sue and set aside a foreclosure that has already taken place. But you must provide evidence of irregularity, misconduct, fraud, or unfairness on the part of the trustee or the lender that caused or contributed to an inadequate price. The burden of proof is on you. Damages are the only remedy. You cannot prevent a third-party purchaser from keeping your house even if he is aware of your claim against the lender and even if he believes your claim to be valid. Defenses like the absence of a delinquency or violations by the lender of federal or state commercial law may not be raised.

Foreclosure can also be challenged by a counterclaim when the lender or other new owner of the property seeks possession by a “detainer” action.

Not every new owner is successful in obtaining possession. It may overlook the proof that is necessary to show that it the foreclosure was conducted properly and that it was entitled to foreclose. You may and should contest every assertion made by the new owner, even if you do not have a lawyer. The new owner has the burden of proof. If it fails to meet that burden, the court may conclude that you are entitled to remain in possession even though you no longer own the home.

Filing Bankruptcy before foreclosure occurs is the generally the shortest and simplest procedure. A bankruptcy filing automatically prevents foreclosure temporarily and sometimes permanently. You get the opportunity to cure a default in your payments by paying the delinquent amount in installments over a reasonable period. You must file before the foreclosure sale takes place, a time that usually is only 20 or so days after the foreclosure process starts with a letter to you or a notice in a newspaper.

You can file for bankruptcy after foreclosure and set aside the foreclosure. Even you do you not succeed in setting aside foreclosure, bankruptcy will discharge all or part of a deficiency judgment against you for any amount still due after the foreclosure occurs.

An article in Business Week claims that that bankruptcy laws have backfired on mortgage companies because the new laws make it so much harder to file causing many people to allow their homes to fall into foreclosed before attempting to file bankruptcy. This article is only partly right. Yes, filing bankruptcy takes a lot more work since the new bankruptcy laws were passed in 2005. But filing Chapter 13 can still stop a foreclosure in its tracks. Despite the hurdles put in place by stricter bankruptcy laws, I have helped thousands of families stop foreclosure and keep their homes by creating a 5 year repayment plan debtors can afford. The new bankruptcy law may not have the same strength it had prior to the law but it still packs quite a punch.

1. If you meet the income requirements of the new bankruptcy law you can still discharge credit card, medical bills and other unsecured debt under Chapter 7 and possibly save your home from foreclosure.
2. Filing Chapter 13 still stops foreclosure, judgments and wage garnishments while you setup a court approved repayment plan.

Don’t allow the changes in bankruptcy law to stop you from taking actions today that can prevent your financial picture from getting worse.

Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or repossessing the property by which the loan was secured. The foreclosure process begins when the homeowner defaults on the mortgage payments and the lender files the necessary documents to begin the foreclosure proceedings.

To understand the process, you need to understand where the lender’s right to foreclose comes from. At the time of grating you the loan, the lender wants to secure his loan so that he does not lose out in the event you are unable to pay the loan. The lender generally asks for some property as security. In the case of a housing loan, it is the house that becomes the security. This is called mortgaging the property. The house is the collateral for the loan. When you mortgage a property with the lender, the lender acquires a claim over the property. This claim is referred to as ‘lien’. The lender can exercise his lien in case you default on the loan. Normally this exercising of the lien implies the authority of the lender to foreclose on the property.

Once you get too far behind in your payments, the lender will begin the foreclosure proceedings. This usually involves a lawsuit in which the lender takes your home to satisfy the debt due to your failure to comply with the mortgage. The lender may actually take your home, or have your home sold to pay off the mortgage. As a result of the foreclosure, you loose whatever rights you have in the property. The proceeds of the sale are used to pay off the mortgage.

Once foreclosure proceedings are complete, your right of redeeming the mortgaged property ends. It is a termination of all your rights in the property. Foreclosure is a process in which the property becomes the absolute property of the lender.

Because so many banks are facing massive losses from loan defaults many are desperate to quickly dump delinquent debtors into the foreclosure process. According to an article published in the San Francisco Chronicler some banks are less willing to re-negotiate the terms of loans that are in default or delinquent.

The San Francisco Chronicler says: "As Wachovia Corp. struggles under a souring portfolio of loans inherited from an Oakland company, the nation’s fourth-largest bank is proving among the least willing to modify mortgages in ways that would help local borrowers hold on to their properties, housing rights groups claim."

This is not surprising, Wachovia recently suffered under suspicions that it would be one of the next banking titans to fall, sending its stock values into a nosedive. But whether Wachovia fails or not, those that suffer the most under this tightening credit noose will be regular homeowners who find themselves facing out of control inflation in nearly every area of their life from food to gasoline and home heating and cooling costs. As the money gets tights many panicked homeowners are turning to desperate measures, bad refinance loans and eventually foreclosure.