Explore all options to avoid foreclosure

Q A friend of mine is facing serious difficulty in meeting her monthly mortgage payments. I am concerned about her and want to know what her options are. What exactly will happen if she fails to keep up with her mortgage payments? What can she do to protect her home?

A Failure to keep up with your mortgage payments may result in foreclosure and ruin your credit score. Foreclosure is a serious problem these days given the tough economic climate.

It is the legal means by which a lender can repossess your home if your home was pledged as security for the loan and you fail to make timely payments to the lender.

States vary in their exact foreclosure process. Georgia keeps rather friendly creditor laws on the books. Georgia is a classic title theory state, wherein borrowers give the actual title to their house to the lender to secure the payment of the loan through a deed to secure debt or security deed.

This is quite different from other states where lenders hold merely a lien on title. The fact that lenders in Georgia hold title to your home through a security deed allows them to foreclose upon default relatively fast and nonjudicially (i.e., without having to go to court to transfer legal title).

Certain notice requirements prior to foreclosure may be required, though. To minimize risk of foreclosure, you should prioritize expenses and save money. If you find yourself still falling behind on loan payments, contact your lender immediately.

Lenders are not in the home-owning business —- they are in the money-lending business and should offer ways to help you through difficult financial times. Motivated by government pressure and altruistic intentions, many banks have announced relief programs to help stressed borrowers.

Open and respond to all mail from your lender. It may include valuable information about foreclosure prevention options. You may also want to contact a U.S. Department of Housing and Urban Development counselor. HUD funds free or very low cost counseling nationwide, and it can help you better understand your legal options and even represent you in negotiations with your lender if necessary.

There are alternatives to foreclosure. For instance, the lender may be willing to refinance your debt and may even extend the term of your loan. This should reduce your monthly payment amount. You might also ask the lender for special forbearance (i.e., a temporary reduction or suspension of your payments).

Another option, as a last resort and solely as a means to protect your credit score, is to voluntarily give back your home to the lender by deed-in-lieu of foreclosure.

Now, as you weigh your options, be wary of foreclosure rescue scams. At all times know what you are signing. Seek advice from a lawyer or approved and trusted financial counselor if necessary. In addition, reduce all sales terms to writing. Oral promises and agreements relating to the sale of land are usually not legally binding.

Jonathan R. Benator, attorney of Weinstock & Scavo P.C.; jbenator@wslaw.net, www.wslaw.com. This column is designed to provide information in regard to the subject matter covered. It is not intended to render legal advice. Have a question you would like answered in this column? Please contact James J. Scavo c/o Weinstock & Scavo P.C., 3405 Piedmont Road, Suite 300, Atlanta, GA 30305.