Manage your mortgage

Look ahead when facing foreclosure Behind all the grim national foreclosure statistics are real people who need help.

If you’re one of them, and you could not stop the foreclosure of your home, here are some things to do and expect:

Get counseling now.
You may need help transitioning out of your home into a rental property and you will need assistance rebuilding your credit, said Bruce McClary, corporate trainer at ClearPoint Financial Solutions Inc. in Richmond.

You’ve also got to figure out why the foreclosure happened, McClary said, “because if you do move into homeownership later, you don’t want to repeat that process. Going through foreclosure once is horrifying enough.”

Choose a credit counselor: ClearPoint (877) 422-9044; Housing Opportunities Made Equal (804) 354-0641; NeighborWorks Resource Group (804) 329-2500.

Prepare to move.
Get your stuff out because when the eviction date rolls around, you won’t have any legal rights to the property, said John Ventura, a consumer attorney in Texas.

If you’re ordered out, “you’re homeless at that point. You can’t take anything with you.”

Whatever is confiscated goes into storage. To get it back, you may pay a hefty storage bill.

Look for an apartment ASAP.
You want to find one before word of the foreclosure hits your credit report, said James Hargrove, senior vice president of NeighborWorks in Richmond. “Once it hits your credit report, it’s going to be very difficult to find rental housing.”

Ask family and friends to help.
They may provide a temporary place to stay or some funds.

Call the United Way of Greater Richmond & Petersburg.
Dial 211 or (804) 275-2000.

A specialist will provide you with resources for low-cost housing, emergency shelter, first-month rent assistance, clothing and food, if necessary, and even furniture storage or furniture replacement.

Expect collateral damage.
“If you fall behind on one loan, another creditor will see you as a big risk and may hike your interest rate from, say, 8 percent to a whopping 29 percent to 30 percent,” McClary said. Now, you may fall behind on your other obligations.

Expect to owe the IRS.
If your house is sold for less than what you owe on it, the mortgage company will file a Form 1099 with the Internal Revenue Service for the difference and you may have to pay taxes on it, Ventura warned. Unless, that is, you’re insolvent and can prove it.

Learn the tax consequences of your foreclosure. The IRS has a special section on its Web site for people who lose their homes.

Go to IRS.gov and type “home foreclosure and debt cancellation” in the search box. Call (800) 829-1040.

Your house may sell at a good price.
Losing your home is a difficult enough situation to be in, Hargrove said. But in the Richmond area, homes have held their value. Your house may sell at a high enough price to cancel the amount that you owe the lender.

Start saving.
Once you’ve gone into foreclosure, typically you’re at least three months behind and you’ve accrued late charges, Hargrove said.

“If a foreclosure date has been established, they’ve already referred it to an attorney.”

Litigation fees will get tacked on and could more than double what you currently owe.

If your mortgage is, say, $1,000 per month, you may wind up owing $6,500."Typically, when you get to three months late, it’s very rare that a lender will say, ‘Send me one payment.’ They want it all,” Hargrove said.

. . .

Foreclosures have many stages. An untold number go all the way to auction. “Not every home can be saved,” said John Snyder, home ownership specialist for NeighborWorks America.

But all is not lost, said Snyder.

“Most often, people do not end up in the street. They just find alternative housing. With the proper education and motivation, a family can restore their credit and get back into the position of affording another home,” he said.

Contact Iris Taylor at (804) 649-6349 or {encode="itaylor@timesdispatch.com" title="itaylor@timesdispatch.com"}.