Avoiding Foreclosure After the Holidays

This is the season of spending. Credit card balances rise, seemingly inversely to the temperatures. People who entered November with all of their credit cards maxed out are now scouring their statements again, checking for the spare five bucks on their credit limits.

But this kind of spending can get you in trouble, the kind of serious trouble that can prevent the mortgage from being paid and risk your home in the process.

Of course, some people find themselves facing foreclosure (or at least, delinquent housing payments) for other reasons that are not so jolly. Medical problems, divorce, and other lump-of-coal life experiences often wreak havoc with homebuyers' ability to make the mortgage on time.

As embarrassing as such a situation can be, it isn't the time to keep quiet about it. A call to your bank or their collection agency should be your first step, according to Adarsh Sangani, Vice President of Loan Servicing and Quality Control for Fremont Bank.

"If you went out of control on your spending and you ran out of money and now January comes, calling is the best thing you can do," he says.

That tendency to clam up can actually make the situation worse. "A lot of times, when borrowers have trouble, they just stop calling the bank. When people don't call the bank, they have no idea what kind of hardship you are going through. You really need to pick up the phone, call the bank, and tell them what the problem is," he explains.

Sangani says that that doesn't mean everything will automatically be better, but in most cases, the bank will try to work with the borrowers to make the best of the situation.

Sometimes, that might mean a temporary forbearance, allowing borrowers to pay less or skip payments. In other instances, it might require the home be sold, but done in a way to do the least amount of harm to the borrower.
At the end of the day, the bank will probably try to figure out the best alternative, Sangani explains. "The bank doesn't want to foreclose on the property."