by James Parks, May 5, 2008

The mortgage foreclosure crisis, fueled by years of unchecked predatory lending practices and a speculative bubble in real estate prices, has resulted in a disaster for millions of America’s homeowners. Not since the Depression of the 1930s have so many U.S. homeowners owed more on their mortgages than their homes are worth.

Defaulting on the Dream, a new report by the Pew Charitable Trusts, projects that one in 33 current U.S. homeowners may be headed toward foreclosure in the coming years because of subprime loans. But the crisis affects not just homeowners. Communities suffer as families move out, decreasing the tax base that funds vital local services.

And there are the silent victims. The Brookings Institution projects that over the next two years, an estimated 2 million children will be directly impacted by the mortgage crisis as their families lose their homes due to foreclosures. These children are not just losing their homes and their friends, but their education is being disrupted as well.

While Congress, state governments and organizations such as the AFL-CIO work to find long-term answers to the crisis, many homeowners need help right now in avoiding foreclosure and keeping their homes. Millions of others need to know how to avoid taking out a loan that will become a problem later.

We have collected some of the top tips you can use to keep from losing your home. These tips come from experts such as the federal Housing and Urban Development Department (HUD), the AFL-CIO Union Privilege program and Freddie Mac, the federally chartered housing finance corporation.

The most important first step, these experts say, is not to ignore the problem. Recognize you have a problem, and that you need to deal with it. They suggest you start by contacting your lender immediately. The farther behind you fall, the harder it will be to set things right. Lenders do not want your house. They have options to help borrowers through difficult financial times. Here’s what else the experts say you should do:

• Open and respond to all mail from your lender. The first notices you receive will offer information about foreclosure-prevention options that can help you weather financial problems. Later mail may include important notices of pending legal action. If you find yourself involved in legal proceedings, you won’t be able to plead ignorance if the loan holder can show they made diligent efforts to notify you.
• Know your rights. Review your loan documents for the specific language regarding actions the lender can and cannot take in case of nonpayment. Research the foreclosure laws and timeframes in your state by contacting your state government housing office (the process is different in each state).
• Talk to a housing counselor. If you are a union member, you can call the Union Plus Save My Home Hotline, at 1-866-490-5361 or you can click here to find a HUD-approved housing counselor in your state.
• Be on the lookout for scams. If any company or individual promises they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home. Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional or a certified housing counselor. Other for-profit companies may contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three months’ mortgage payment) for information and services your lender or a housing counselor will provide free.
• Set some spending priorities. Review your budget to see where you can cut spending to find the extra cash you need for your mortgage payment—for instance, canceling cable or cell phone service, eliminating entertainment expenses or selling a second car or jewelry.

Describing the rash of mortgage foreclosures as threatening the American Dream, the AFL-CIO Executive Council in March outlined the steps needed to solve the mortgage crisis. In a statement, the Executive Council called for a six- to 12-month moratorium on mortgage foreclosures.

The Council also called for strong new rules for the mortgage and financial markets that hold the industry accountable and for a change in bankruptcy laws to allow mortgages to be modified so families can keep their homes. Specifically, urging Congress to pass the Homeownership Preservation and Protection Act of 2007 (S. 2452) to establish new consumer protections and allow state attorneys general to enforce existing strong state laws, the Emergency Home Ownership and Mortgage Equity Protection Act (H.R. 3609) and the Helping Families Save Their Homes in Bankruptcy Act of 2007 (S. 2136), which will prevent hundreds of thousands of Americans from losing their homes by allowing them access to the same bankruptcy relief offered to those who have vacation and rental homes.

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