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How Repayment Plans Can Save You From Foreclosure

Foreclosure is something that probably snuck up on your faster then you would have ever thought it would. If you are not really sure of all of the ins and outs of the foreclosure world you probably at least have an understanding that it about you no longer having your home after the bank takes it back.

Essentially, foreclosure is the legal process that the lender decides to make use of when borrowers are no longer making their mortgage payments. The home will eventually be sold at a foreclosure auction and the homeowner loses all rights to the home.

In the midst of all of the paperwork, bills, and collection calls that you are receiving, you probably have heard the total amount due that you owe several times. In fact, every time that you call in, you are probably given the total amount that you owe and you are asked if you are ready to pay it.

Depending on how far past due you are and how much your monthly payments are, you could be looking at an amount that is well into the thousands.

Ask For The Plan If You Are Not Offered It

Assuming that the reason you fell behind was because of an unexpected expense or loss of income, you may not be ready to pay everything all at once, even if your financial situation has improved.

If the mortgage company has not yet offered you are repayment plan, you need to ask about it. Even if your account is active in foreclosure, repayment plans can still be granted and the foreclosure process can be stopped.

Most collection agents are trained to ask for the total amount due and to try and pressure the person into accepting that as their only way out of foreclosure. All you have to do is to assure them that you are unable to do that, but you do have the money to start a plan and to keep up with the monthly payments.

Don't Wait Until Your Payday

If you will not have the money you need to start a repayment plan until two weeks from now when you get paid, do not wait for then to call. Call your mortgage company now and advise them of your pay dates. They can set the plan in place with your first payment due when you get paid.

By doing this, you may be able to stop additional fees from going onto your account if it has not yet been sent to the attorneys. Sometimes with manager approval and an agreed repayment plan in place, the file will be delayed from being sent to the attorney's office in order to help you out.

Information You Will Need To Give

Once you begin talking with the collection agent about a repayment plan, he or she is most likely going to ask you why you fell behind. Even though this may seem like a personal question that you would rather not answer, it is in your best interest to tell them everything.

Be honest and make sure that you fully explain your situation. The more open and honest the mortgage company believes you to be, the more they will be willing to work with you.

And also, they consider it their right to know why you haven't paid and often times get upset if you refuse to answer their questions. After all, if you let someone borrow a hundred thousand dollars of your money wouldn't you want to know why they weren't paying it back?

They will then ask what your income is. Do not lie about this because this is a big part of the information that will be used to determine the monthly amount of your repayment plan.

You do not want payments that are too large but you do not want them too small either. Take into consideration your regular income and any side work that you do on a regular basis as well such as cutting grass or babysitting.

Next, you will be asked about all of your monthly expenses. You want to make sure that you are being careful with this. They will most likely run down a list of your bills such as car notes, other mortgages, student loans, food expenses, gasoline expenses, and utility payments.

In the end, when they calculate the difference between your income and your utilities, there has to be a surplus. If there is not a surplus in your monthly income, at least enough to make an additional one-third payment each month, they may deny your request for a repayment plan.

Before Calling In

You want to make sure that you are not lying about your income or your monthly expenses as you are only setting yourself up for trouble. But, you do not want denied for a repayment plan as it may be your last hope to pull your home out of the dangers of foreclosure. Sit down on your own and go over your expenses and income on your own.

Figure out what your surplus or deficit is. If there is a deficit, figure out how you are going to solve that. Is there a storage shed unit you could stop paying on? Is there a rent to own bill, such as for a computer, that you could let go? Where can you make adjustments?

Once you have all of that figured out, you could then call in to request the repayment plan. Make sure that you are not pumping your monthly surplus up too much. Some people make the mistake of thinking that this will ensure that they get a repayment plan but it could actually do them more harm then good.

If there is a super large surplus sitting there, or at least if the lender thinks there is, they could request that you make double payments until you catch up. This is probably not something that you can really afford. If you say no to that then they will realize you were not being truthful from the start.

Things To Remember

The repayment plan that is set by your lender is something that is set in stone. If your home is currently in foreclosure but your first payment is not for a week from the time you set the plan, the foreclosure action will not be stopped until you make that first initial payment on the plan.

That first payment shows the lender that you are serious and legally, once any kind of payment is accepted on the account foreclosure action must stop that same day.

Make sure that you are making your payments on time. If you are late, even by a day, the lender may cancel your repayment plan and you will have to start it all over. There is even the chance that they could refuse you a second plan and foreclosure could pick up where it left off or simply begin again, depending on how far past due your account is when the plan was deleted.

Making Better Progress

If you have a repayment plan that is going to take you eight months to complete, you may want to see what you can do to make it completed sooner. The longer you are on a repayment plan the more at risk you are for something going wrong that will cause you to miss one of the payments. If you come into additional money, send it in. It will not hurt your repayment plan.

After you make two or three payments on your repayment plan, check to see if you now qualify for a loan modification. The loan modification is a program that will bring you current and possibly lower your interest rate, in turn giving you lower monthly payments. Some companies require a small payment history with good standing before approving such a deal.

What About When The Plan Is Over?

When the repayment plan is over, your account will be caught up, at least in terms of the monthly mortgage payments. Depending on your financial information and the collection agent that you set the plan with, you may or may not have outstanding late charges and other fees on the account.

These fees do not collect interest, they are not reported onto your credit report, and they do not cause a foreclosure. Simply pay those as you can.

Now that you have successfully completed a repayment plan, your mortgage lender will be more willing to help you again should you ever fall into some financial trouble again. You have built your reputation with the mortgage company and that is something that you can only benefit from.

All in all, you want to make sure that you are getting yourself set up on a proper repayment plan. By sticking with the plan you will have protected your house from foreclosure action and you will have brought your monthly mortgage payments current. It may take a little time and some additional budgeting but as long as your home is worth it to you, you will be able to manage it.