One of the most important aspects of the foreclosure process is simply accepting reality and having reasonable expectations. Homeowners may be presented with a large number of potential options to save a home from the lender’s lawsuit, but potential solutions can often result in disappointment. Unfortunately, this seems to be one of the areas that homeowners have a difficult time with.
Usually, homeowners in a financial hardship will begin to fall behind on their mortgage payment and other monthly bills and then begin searching around frantically for a foreclosure lender that will refinance them. Too often, they are also looking for a lower interest rate to offset the effects of an adjustable rate mortgage (ARM). Thus, as they become increasingly credit-unworthy, their need for a more affordable payment increases in kind.
This sets up a far too common expectation in the minds of foreclosure victims. They believe there is a chance they can get a lower monthly payment through refinancing their existing mortgage. Unfortunately, this is simply not true, in most cases. Even if they could qualify for any kind of mortgage while facing foreclosure, the payments may go up dramatically, or at least remain the same.
Selling the home may also create some unrealistic expectations. Even before the current crash of the housing market, home sales were slowing down and properties were sitting on local markets for months without a buyer. Homeowners who have little time to sell before their house is auctioned off will feel the pressure even more, and properties are still overvalued, according to many estimates. This does not mean selling is not an option, but homeowners facing foreclosure may need to bargain for more time or negotiate a short sale.
But it is in the various loss mitigation options that homeowners seem to have the highest expectations; expectations which will frequently turn out as far too optimistic. Although banks are becoming more receptive to mortgage modification or repayment plan offers, they can still take up to several months to make a decision and do nothing more than turn down the offer at the last minute. These types of plans are heavily marketed to homeowners as lowering their monthly payments, when this would require a very large down payment, steady income, and proof that the hardship leading up to the foreclosure has been overcome. Most often, the owners will be given a repayment plan which gives them an opportunity to pay back the arrears over several months, actually raising their monthly payment.
In fact, homeowners facing foreclosure have numerous ways to stop foreclosure that they can consider in any given set of circumstances. Unfortunately, these same owners can be their own worst enemies, bringing unreasonable expectations of a quick, painless, and more affordable solution to the problem. Reality often disabuses them of these expectations, though, but it is best for homeowners to be as prepared as possible for any outcome to their efforts and have backup plans just in case one solution falls through.