Lord your forgiveness is the sure and unchanging foundation of my faith. I thank you that you have made it available to me through my faith in your Son.

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The Mortgage Crisis Hits Home

Phyllis Wallace

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This bit of advice is from a savvy friend in the industry. I asked him, "What about my listener whose house is seriously endangered by the mortgage crisis and who is freaked out about what will happen to her home, her money, and her life in the midst of this economic crunch?"

Here's what he told me: She can go to her lender and tell them her current mortgage contract is untenable and request they change the terms and mitigate their possible losses. While this is not a formal workout process, it is a form of workout. This is called "loan modification." She must, however, be able to prove economic hardship; her lender is not going to modify her loan just because the rate is about to reset. She also must have enough income to make payments on the renegotiated loan. She should only go through this process if she is certain she can meet the terms of the renegotiated loan.

Banks are still working with borrowers and in some cases preventing foreclosure. However, figuring out who actually controls the loan (which often times won't be the same entity that is servicing the loan) can be a challenge.

Many states also have mortgage foreclosure prevention hotlines that may be consulted online. These are state-run services that may guide a borrower through what to do to in order to keep her house.

She should also draw up a simple balance sheet for her household budget; free templates are available at www.betterbudgeting.com. Through this process, she may get a reality check and realize that while homeownership is something she wants, her current home and the accompanying debt are not what she needs.

Otherwise, she may decide that she needs and wants everything that she has and is either unwilling or unable to tighten her belt any further. In that case, she needs to consolidate her debts, which is just another way of refinancing and extending the term length she will be paying it off. She should be warned, however, that the length of time over which she will be making these payments will likely be incredibly long. There are options for this procedure described at www.finweb.com.




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