Avoiding the Foreclosure Crunch

Avoiding the Foreclosure Crunch
By: Jeff Cunningham

If you're trying to sell a house right now you know the market is in a slump and according the the National Association of Realtors, things are expected to get worse in 2008.
Record numbers of people are losing their homes to foreclosure because they simply can't afford to make the payments, but there are some things you can do to avoid foreclosure and to get back on track after one.
"Lenders started getting creative in the last few years because the housing market was so strong," said Tammie Goodson, a vice-president of First Missouri State Bank in Cape Girardeau. "Do you ever remember seeing this many foreclosures in your career?  No.  And we bankers blame it on the sub-prime lending markets."
Here's how it worked.  Most people have fixed 30 years mortgages.  The rate never changes over the life of the loan.  Sub-prime loans offered lower interest rates to begin, but rates that would adjust in two to three years.
For people with less than perfect credit, maybe don't have verifyable income, it's a way to get them into the housing market.
In the last two to three years, lenders made a ton of variable rate loans.  Then, the rates adjusted and overnight people's house payments went up hundreds of dollars and a lot of people cant keep up with the payments.
It's everywhere.  California, Florida and Ohio have the highest foreclosure rates.
Stockton, California is the worst top 100 city in the United States for foreclosures with 7000 filings, up 465 percent from last year.
Memphis is 14th on the list, St. Louis is number 56. 
So, what do you do to avoid foreclosure?  Tammie Goodson says call your lender before you miss a payment, They will work with you.
"The lender doesn't want the house back.  They are not in the home business.  They will help you with different options," she said.
What do you do if a foreclosure is unavoidable?  Sit back and be patient.  Your credit is damaged and lenders will not work with you again for at least three years.
"We know everyone goes through a tough time.  What we want to see is that you are back on track," Goodson said. 
To get back on track in those three years following a foreclosure, you have to re-establish credit.  It's not always easy.
Get a secured credit card where you pay in advance.  Perhaps buy a car at a higher interest rate.
"Something that shows you made your payments on time for 36 months," Goodson said.