But Realtors say homeowners can avoid becoming a statistic

Following three months of declining foreclosure listings, the number of foreclosures in October in Tooele County more than doubled those in September.

From July 2009 to September 2009, the number of foreclosure filings in Tooele County decreased from 116 to 40, according to RealtyTrac, a national foreclosure listing service. But in October the number of new foreclosure fillings jumped to a total of 88.

“We have just seen the tip of the iceberg,” said Nicole Cloward, sales agent with Tooele Re/Max Platinum who has just completed training as a certified distressed property expert. “Back in 2005 and 2006 we had home loans written for interest only. Those loans are now coming due and payable and payments will be going up.”Cloward anticipates more foreclosures loom ahead for Tooele homeowners as these loans will now be re-negotiated during a recession when income is down and property values have experienced a decrease.

For this reason Cloward recently completed distressed property training so she can offer assistance to families to help them stay in their homes and avoid the pitfalls that can lead to foreclosure.

Cloward lists a variety of conditions that may qualify property to be listed as distressed, which usually means that mortgage holders will be willing to work with the property owner to keep the current owner in the home.

Those conditions include unmanageable debt, job loss, medical bills, serious illness, incarceration, divorce, death, military service, insurance payment increase, mortgage adjustments, relocation and reduced income.

Charles Prows, manager of Premier Mortgage’s Tooele branch, suggests the first thing a person should do if they are in the position of not being able to make a payment is to contact their lender.

“Call the people you are sending your money to and let them know your situation,” Prows said. “They often will work something out with you to negotiate the loan or accept partial payments.”

Waiting, delaying or ignoring the lender is the most common mistake people make, according to Prows.

According to Melissa Collings, sales agent with Re/Max Platinum in Tooele, a local Realtor, especially one certified in dealing with distressed property, can help homeowners understand their options and the long-term effects of those options.

“A foreclosure goes on your credit report and will mean it may be up to seven years before you can qualify to buy a new home,” she said. “In the meantime, your foreclosure is on your credit report and it may affect your current job or new job opportunities, military clearances, and even the ability to get car insurance.”

Cloward lists nine alternatives to foreclosure, each with its own ups and downs, and many are dependent on cooperation of the lender.

“Lenders, especially if you talk to them early, are usually cooperative,” Cloward said. “It is to their advantage to keep someone in the home making some kind of payments. Otherwise they end up with an empty home to sell and expenses to maintain it while it is on the market.”

Cloward’s list includes reinstatement of the loan. If the homeowner is not too far behind in payments, the owners may work with the lender to repay the amount past due and then reinstate the original terms of the loan when things are caught up.

Another method is asking the lender for forbearance, or putting the loan on hold. It is another method that may work early on before the owner is too far behind in payments. Cloward said the lender may not agree, but nothing is lost by asking.

Refinancing is a popular way to get a lower interest rate and lower the monthly payment. Homeowners may refinance with the original lender or a new one, but this requires paying closing costs so the owner will need to have some cash.

The existing loan may also be modified to drop payments or the interest rates, according to Cloward. She has seen monthly payments reduced by up to $100 a month, which may or may not be enough help for some homeowners.

Another option is the owner could sell the property outright, pay off the lender and then move to a smaller home or a rental with lower payments.

The homeowner may also be able to turn the property into a rental. If they are not too far behind on payments, the lender may accept this if the owner can show they have a tenant.

A short sale option avoids the process of foreclosure and is easier on your credit rating, according to Cloward. In a short sale, the home is sold for less than what is owed, but the lender agrees to accept the amount of the sale.

In a deed in lieu of sale, the homeowner gives the deed to the lender in lieu, or in place of, foreclosure.

The last alternative on Cloward’s list is filing for bankruptcy.

Prows is seeing new trends like insurance programs that help protect the buyer and the lender becoming part of the loan process.

“For a fee you can get an insurance program that will pay up to six months of house payments during the first two years of the loan if the buyer loses his job,” Prows said.

Prows also said people should not be in a hurry to walk away from a home just because it is currently worth less than what they owe on the home.

“Just because you owe more than the current value of the home does not mean that you should look to sell the property or walk away from it,” he said. “If you can make the payments and stay in the home the property value will come back up again, like other investments. It has happened before. This time it might take a little longer.”

Prows suggested homeowners in financial distress should make use of the Rainy Day Foundation at www.rainydayfoundation.org. The Rainy Day Foundation is a non-profit organization dedicated to providing educational and financial assistance to homeowners experiencing financial difficulties.

Tim Gillie: tgillie@tooeletranscript.com