The Carnival of Personal Finance is up at Wide Open Wallet right now! There are some great posts for your reading pleasure, including my submission on what to do to stop a foreclosure that is already in progress.

Other posts that I enjoyed from the Carnival of Personal Finance this week include:

• Money May Satisfy But Does Not Bring Happiness
• No Job Is Below You
• 12 ways to earn extra money doing what you love
• 3 Reasons Why You Should Not Do Market Timing
• Is Owning or Renting Best?

image source: Wikipedia

Right now, there is a lot of talk about foreclosure. Naturally, it is best if you can avoid foreclosure to begin with. Talking to your mortgage lender when you think you are in trouble and working to avoid missed payments is the best way to proceed. But in some cases a foreclosure notice is served, and the process begins before you can really take the steps needed to prevent foreclosure.

It is possible to stop foreclosure once it starts, but it can be difficult. You will have time, however: In most states, the foreclosure process takes between 90 and 180 days, giving you some time to try and save your home before you are evicted. Check your state laws to see how long the foreclosure process lasts, and figure out a plan of action that might help you save your home. Remember: If you have to let something slide, it’s better to miss payments on unsecured debt rather than put your home at risk.

Option #1: Refinance the house

If you have 60% to 70% equity in your home, it is sometimes possible to refinance your home. Your mortgage, plus the missed payment amount, is paid to the bank by the refinancing institution. This requires specialty financing, and can be expensive in terms of fees in some cases. And it can be difficult in this climate to find someone willing to refinance your home.

Option #2: Pay the amount you are in arrears

Your next option is to make up all of your missed mortgage payments. This can be a daunting task. Many banks require an “all or nothing” payment to make up the entire amount you owe. Additionally, it can be even more difficult because you will have to make your current month’s mortgage payment on top of what you are behind with.

Option #3: Payment plan for the amount you owe

Another options is to negotiate a payment plan for the amount you owe. You can get a third-party to help you with this. If you can scrape together a partial payment for what you owe, you can — in some cases — arrange with your mortgage lender to set up a payment plan to cover the rest. This payment plan can be separate from your regular mortgage payment, or it can be added to your mortgage payment as part of a loan modification that extends the term length of your mortgage loan. Missing a payment under such a plan, however, can result in immediate resumption of the foreclosure process.

Option #4: Declare bankruptcy

Bankruptcy should always be the option of last resort. However, there are cases in which you can save your home by going through Chapter 13 bankruptcy — if you qualify, and if only in certain cases. Chapter 7 bankruptcy can delay a foreclosure, but you will still need to save up your money to save the house.

Look at your options and try to work with your mortgage lender and/or mortgage servicer in order to work out an agreement. Unfortunately, because loan modification or stopping foreclosure is voluntary on the part of the mortgage lender, you might not be able to do anything. But you can learn more about your options — and improve your chances of success — by visiting the HUD Web site and getting a list of approved foreclosure counselors in your state.

image source: respres via Flickr

This video takes a situation faced by many (foreclosure + decimation of retirement investments) and makes it funny.

Happy Friday!

When the bank sends you a notice of foreclosure, it may seem like a done deal. But, what if it isn’t? Kelly over at Taxgirl forwarded me an email that offers some great advice on how to work through the foreclosure process. The advice comes from Jacob Benaroya, president and managing partner of Biltmore Capital Group, an institution that purchases problem loans from mortgage lenders.

Here are 10 things  Benaroya suggests when your home is in foreclosure:

1. Don’t hide. Respond to mail and phone calls directly.
2. Be proactive. Contact the lender and talk about your financial situation.
3. Realize that the mortgage lender isn’t in the real estate business. The lender wants the payment (and the fees, of course!).
4. Understand that your mortgage lender may be more willing to negotiate in the current climate.
5. Know your rights. Review all mortgage loan documents and understand what your lender can (and can’t) do if you fall behind in payments.
6. Do not turn to companies that promise to prevent foreclosure. They charge fees that could be better used to make a mortgage payment. There are free resources that can help you.
7. Contact a counselor that has been approved by HUD. You can receive free or very low cost counseling about what to do about your foreclosure.
8. Watch out for foreclosure recovery scams. Mortgage fraud is growing. Watch out for scammers who claim to negotiate terms, but are really out to get your house — or just walk away with a “fee.”
9. Prioritize spending. Look over your finances and prioritize your expenses. Make sure that your home payment is close to the top of the list. Even credit card payments can be delayed if your home is in danger of foreclosure.
10. Use other assets. Do you have items that you can sell for money? Jewelry, a second car, a loan against a life insurance policy and even a garage sale can be sources of money you can use to hold off foreclosure.

Personally, I think it is very important to work directly with your lender. You can enlist the help of a trusted adviser to help you negotiate. Many lenders, if you show them that you are doing your best, are willing to work with you. Avoiding foreclosure is in your lender’s best interest as well. But it has to be a negotiation that lenders can live with, as well as something that works for you.

I also think that prioritizing your spending and cutting out unnecessary expenses, as well as doing what you can (including selling some items) to raise the funds are important items.

image credit: sxc.hu

I’ve been thinking a lot about “economic stimulus” and the tax rebate. The tax rebate, especially, was brought to my attention on Friday when the announcement was made that direct deposit tax rebate payments will start today — ahead of schedule. Tax rebate time will continue through July, depending on when you filed your tax return, what your last name is and whether you are getting your tax rebate via direct deposit or check.

And whether or not we’re in a recession (which is debatable) it is important to keep in mind that with food prices inflation and increasing oil prices, this tax rebate isn’t likely to do much for the economy. Indeed, a lot of people will probably us the money to buy increasingly expensive necessities. After all, it’s really about personal finances and priorities. It’s not longer about the economy. Indeed, one commenter made a very good point about all this recession talk:

I don’t care what you call it. Six houses in my neighborhood are in foreclosure. Three of my neighbors have been laid off. The people in the house next door have walked away and the house is now abandoned. And I live in Fairfax County, Virginia, which is supposed to be one of the wealthiest counties in the US. I’ve been around more than 70 years and have never seen anything like this in my lifetime.

All this talk about “economic stimulus” and recession and what to do with the tax rebate doesn’t really speak to the individual level of personal finances that you need to consider. At this point, you need to do what’s right for you.

image credit: sxc.hu

I came across something I found rather interesting today. A report that foreclosure is becoming a mortgage trend that is based on financial planning. This isn’t the sort of foreclosure by Americans in bad financial positions (the folks “economic stimulus” is meant to help). This new foreclosure trend actually includes middle to upper middle class Americans who can afford their mortgage payments. Inman News reports on this rising mortgage trend:

Meanwhile, the homeowners can avoid the risk of more negative equity and eliminate the cost of owning and maintaining their home from their household budget. And since the property now belongs to an institution rather than another family, why not strip the fixtures and sell them for cash on your way out of town?

The home is now no more than another consumer item. Or perhaps an investment like those on the stock market. Cut your losses and leave. It seems like a rather irresponsible mode of financial planning, much like the craze to get rid of debt a few years ago by filing for bankruptcy.

Do you think foreclosure is a viable financial planning move?

With 2 million foreclosures expected by 2009, some may be tempted to think that only “regular” folks are affected. But even celebrities have money problems (but for very different reasons).

Witness Michael Jackson. His Neverland Ranch is in foreclosure. He ended up over-leveraging his home with a $23 million mortgage loan. And Fortress Music Trust, the company that loaned him the money, was unable to sell the debt. So they initiated foreclosure proceedings.

Looks like both Michael Jackson and Fortress Music Trust made poor finance decisions regarding Neverland Ranch.