Help available for delinquent homeowners

McALLEN - Instead of wishing away the barrage of phone calls, mail and the sudden understanding of what it means to be underwater, homeowners need to quickly seek help if they're falling behind on payments.

Banks are now more willing to work with homeowners who are delinquent and several government aid programs are available to the poor and people who owe more than their homes are worth.

But the longer a homeowner waits, the less help will be available. If they wait too long, the home might be foreclosed, said Marla Lutz, senior certified credit counselor at the McAllen office of the Consumer Credit Counseling Service of South Texas.

"A lot of times people come into us when they have a foreclosure notice in hands," Lutz said. "If they come into see us when there's a problem (developing), there's a lot of options available."

Contacting the lender and opening that dreaded mail is the first step to recovery, Lutz said. Secondly, a homeowner should negotiate with the lender or contact a Housing of Urban Development certified credit counselor to help with the process.

The counseling is free.

Those credit counselors can also help navigate the wealth of federal programs designed to save homeowners from foreclosure that can include everything from some debt forgiveness to a restructuring of the loan with lower interest rates.

Loans backed by the Federal Housing Administration provided homeowners with additional options.

Further, Lutz said, the counselor can also help prioritize debt. While paying all debtors is the best option, when it's a choice between paying down a credit card or making the mortgage payment, many people seem to make the wrong choice.

"We have to prioritize what is important," Lutz said. "If you don't pay MasterCard, what are they going to do to you?"

Consumers should always be wary of foreclosure prevention companies, Lutz said. Some are legitimate companies, but others are scams that could end up costing the homeowner more in the end, according to the Texas Attorney General's office.

Either the AG's Consumer Protection Division or the Better Business Bureau can help consumers identify if an offer is a scam, Lutz said.

While Lutz has been seeing a rush of people since the latest troubles deepened, McAllen-based lawyer Richard Habbermann has filed increasing numbers of bankruptcy cases every month.

But not every person behind on their payments, and even those nearing foreclosure, need to file bankruptcy to save their homes, Habbermann said.

"Banks are much more receptive now. They don't want the property," Habbermann said. "I've been able to talk with them. ‘Do you want the money or the property?' Obviously they want the money."

Robert Gandy, President and CEO of Edinburg-based First National Bank, said that homeowners will sink into deeper trouble the longer they ignore creditors.

Most banks have so-called loss mitigation programs to help homeowners avoid foreclosure.

"If they're chronic delinquents, the foreclosure process is pretty swift," Gandy said. "People have got to pick up the phone and call. Banks are generally working with them."