Sub Prime Home Owners are Facing Problems - hypotheques quebec

One and one half million homeowners in 2007 and a projected two and one half million families in 2008 are facing the problem of foreclosure because they are caught in a subprime loan that they were granted despite the fact that they had poor credit.
Easy credit was the perfect solution at this time, especially when there was no down payment necessary and the initial rates were fairly attractive tickler rates.
But the value of the underlying collateral, the home, is falling fast, and these loans have no equity because of no deposit.
Interest rates close to 10% could mean mortgage payments of over $2,000 on homes that cost only $200,000. Every small adjustment in the ARM (Adjustable Rate Mortgage) could mean a $300 to $400 increase in the home loan payment. A further catch is that the homeowner can’t even try to refinance at a better rate because his credit is still poor and his home value has gone down. (The mortgage balance is higher than the value of the home.)
Can these homeowners find a solution? The federal government is looking into a number of solutions, but a homeowner should first take his own steps to improve his situation.
Ignoring the problem is one of the worst things a borrower can do. As soon as a homeowner realizes he may have a problem with this month’s mortgage, he should contact his lender. Frequently, especially if there has been a change in circumstances, such as unemployment or an illness, the lender will work out a payment plan.
Contact a mortgage counselor. HUD (the Department of Housing and Urban Development) has a list of counselors they endorse who can assist homeowners to find answers to this problem.
Reduce your expenses, especially any credit card debt. Certain expenses may be fairly fixed, like energy or food expenses, but any extraneous costs, such as expensive cell phones or TV plans, should be eliminated, at least until the crisis is over. Use these savings to lower interest credit card debt and save even more.
Find out if you are eligible for government assistance. Some low income families who were current on their mortgage before their ARMs rate reset, can qualify for a 30 year fixed rate mortgages insured by the government.
The last two solutions to consider are the most drastic, and should only be considered if nothing else has worked.
Sell the house. In today’s market, that may mean a loss on the sale, but lenders have been known to consider taking the proceeds of the sale as settlement of the mortgage. It is better for them rather than endure the long foreclosure process.
File for bankruptcy This is the most desperate solution, since it will affect your financial life for the foreseeable future. It will further injure your already poor credit, but if you have no other solution, it is a way to have debt consolidated, reduced and in some cases even forgiven, depending on your income.
Answers do exist, but not if the homeowner waits for the answers to come to him. Aggressively addressing the problem may be the only way to avoid losing your home in foreclosure.