Every day brings news of possible foreclosures in the housing market. What causes mortgage meltdown and how does it affect homeowners who want to sell their homes or readjust their mortgages? Here’s some advice to help us understand the current mortgage crisis:

How bad is the housing crisis?

• It’s pretty tough out there right now, especially if you have to sell your house. This housing mess will most likely last the rest of this year until the beginning of 2009.
• Eventually, prices will stabilize and they won’t go up or down. However, it will still be tough to sell houses.

What is this subprime mortgage mess and how did we get into it?

• At the height of the real estate boom a lot of people bought houses that they couldn’t afford and they didn’t get the best terms when they agreed to their mortgages. These are called ‘subprime’ mortgages.
• Unfortunately, in some cases because they couldn’t make their mortgage payments their homes were taken away from them. This started a domino effect and the real estate crisis got worse.

If you are behind in your mortgage payments what can you do to avoid foreclosure?

• The first thing you should do is to reach out to your lender. It is one of the most important things to do, and it’s one of the things people almost never do.
• You have to ask your lender for help. You can ask that your loan be modified or changed so that you can afford your loan.
• But it’s not always easy to get your lender to talk to you. If that’s happening to you, reach out to the Department of Housing and Urban Development (HUD) (www.hud.gov). They have counselors in cities all over the US who can help you find the best way to get a better mortgage.
• If you are unable to get a better mortgage you should try to find a buyer. You can even do something called a short sale. A short sale is when a buyer purchases your home for less than you owe the bank and the bank has to sign off on it. Times are so troubled right now that a lot of lenders are willing to do this.

If you have an adjustable rate mortgage can you easily switch to a fixed rate mortgage?

• Not necessarily. Some of these subprime loan holders have fees that kick in if you try to change your existing loan requirements.
• If you are in a subprime loan you want to speak to your lender to try to get out of your loan.

What is the downside of just walking away from your home?

• By doing that you are ruining your credit history for 5 to 7 years.
• There is one other thing you might do instead of that and it’s called a ‘deed in lieu of foreclosure.’ Basically you mail your house keys to your lender. It’s called jingle mail. By doing this you are giving up your house and your equity, you are turning your house over to the bank.
• Doing this clearly tells the bank that you can’t make your payments. Your credit score will get hurt if you do this but at least you’re not just running away from a problem.