Foreclosure Help Blog

REBUILDING YOUR CREDIT AND REFINANCING

Are you behind on mortgage payments or facing foreclosure?  Does the monthly mortgage bill always seem unreasonably high or difficult to manage?  Has your interest rate sky-rocketed because of adjusting market rates?  All of these questions are good reason to look into refinancing your loan, especially now while banks are offering historically low interest rates.   If you have a stable source of income but have just fallen behind a couple payments, there is a good chance that your lender or mortgage company will be willing to work with you to modify your loan.  Typically it takes about 12 months of on-time monthly payments to positively affect your credit score.  So if your bank or mortgage company thinks you are credit-worthy but have a less-than-perfect credit score, you can find out if they are willing to put you in a forbearance agreement for 12-24 months.  If you can just get some time to work with, chances are you can recover or at least build up your credit score to refinance your loan amount in a short amount of time.  If you can get back on track in 12 months, you will be setting up for long term stability and also stay in your property.

If you are more than a couple payments behind and are in foreclosure you probably still have time to discuss what options are available through your lender.  Because of the thousands of homes going into foreclosure across the country, most banks now have functioning Loss Mitigation departments that are busier than ever working through REO’s and defaulted loans.  Most banks would much prefer to work with you to restructure your payments if possible as opposed to taking over ownership of the property.  Many banks have been reluctant to write down the true market value of these defaulted properties even while investors are waiting to scoop them up at a discount.  The US government has also given most regional banks more lead-way in bailing them out.  Many of these banks made very risky loans to borrowers that had no business getting approved for a home loan, so the current housing crisis is not entirely the fault of the homeowner. 

As interest rates continue to rise more homeowners with adjustable-rate mortgages are going to struggle to make payments in full.   High interest rates are in many ways the last thing our country needs at the moment.  We are current in an economic environment that is deflating from the real estate boom of the beginning of the decade.  This is coupled with a period of significant deleveraging that is squeezing the balance sheets of most banks and lenders, making it virtually impossible to realize the losses many of them have suffered, otherwise risking going under.  Many banks are now out of business or have been acquired by larger institutions as a result of huge losses in loan defaults made to risky borrowers.  With good credit however, you can still hope to get approved for your home purchase, it is just more difficult than it used to be, which is probably a good thing.