How to Negotiate Out of Foreclosure

Feb. 24, 2009 — -- This is a word to the desperate. If the bills are piling up, if you're behind on your mortgage payments, if you're struggling to avoid foreclosure, there is still hope.

The Obama administration has offered a temporary plan, but even before its details are announced March 4, counseling services report that more than half the families threatened with foreclosure end up negotiating new mortgage terms and staying in their homes.

"The good news is that there is a way to help people," said Bruce Marks, CEO of the Neighborhood Assistance Corporation of America, or NACA, a nonprofit advocacy organization for homeowners. "Make it affordable, make it permanent, end of story."

VOTE: Could You Negotiate Out of Foreclosure?

Boston-based NACA steps in to negotiate settlements between cash-strapped homeowners and troubled lenders. It has been known for in-your-face tactics, such as demonstrations outside bank executives' homes. But they and other advocates say they often get results for people.

"We determine their net income and what their expenses are, to come out with a mortgage payment that you can afford, and then we restructure that loan to make it affordable forever," said Marks.

That would be a welcome thought to Darlene Gray and her husband, who went to an NACA workshop in Stamford, Conn.

"They want to bail out banks?" she said. "What about bailing out the homeowners?"

HOPE NOW, a Washington-based foundation, is one of the largest agencies offering help for worried homeowners, and operates a 24-hour hotline: 888-995-HOPE. The service, which is backed by mortgage companies and advocacy groups, and recommended by the Federal Trade Commission, is free. The Department of Housing and Urban Development can recommend other services. It has an automated toll-free number: 800-569-4287

Why do lenders go along? Because their little secret is that, much as they want you to pay what you owe, it is worse for them to foreclose, throw you out -- and be stuck with your house.