by Ramona Atkins

Created on: December 28, 2008   Last Updated: January 07, 2009

Desperate homeowners do not always think clearly when their home is in danger of foreclosure. There are however a few options as well as protections for them that can afford some relief. Homeowners may be involved in foreclosure consulting services, under certain circumstances convert their current mortgages to affordable loans or declare bankruptcy under certain situations.

Foreclosures of homes is on the rise, and so are unscrupulous foreclosure consultant services who prey upon trusting homeowners wanting to save their homes. Many of these services appear to want to help the unsuspecting homewoner by indicating they would like to assist them in saving their homes. What the homeowner is unaware of is that he/she will be paying extortion type rates to get any remaining surplus funds on their homes by executing an assignmet, deed or Power of Attorney that could have been obtained through more reputable means such as an attorney. California's law has afforded protection for the vulnerable homeowner by mandating certain requirements are in place.

In an effort to protect the distraught homeowner, California law states that the foreclosure consulting service must demonstrate that it is a licensed real estate broker, provide proof in writing that the same is true, be bonded by a surety for two and half times the value of the foreclosed property and provide proof of the same to all parties to the contract before any legal interest in the homeowner's property is transferred. Further, the law indicates that the consultant may not take a wage,lien or compensation on the property before performing the services stated under the agreemnt as per the Civil Code of California. Additionally, it is against the law for the consultant to take any interest in the foreclosure property or obtain a Power of Attorney from the homeowner other than for the purpose of legally inspecting the documents. Violations of these provisions can result in fines as high as $10,000, and imprisonment in county or state prison for each violation.

The Federal Law provides for the Hope for Homeowner's Act, promulgated on October 1, 2008. This act provides for homeownwers to convert their mortgages into loans they can afford. This act was specifically designed for individuals who took out bad loans as a result of unscrupulous lending. In order to take part in the advantages of this act, the homeowner must be in default of his/her primary residence loan, certify that the default was not intentional, and relinquish any debt on the home.

Another alternative for some homeowners with second and sometimes third mortgages is to be aske to be forgiven under Federal Bankruptcy laws so that the homeowner is better able to afford the primary mortgage on his/her property. Many homeowners in this situation have additonal debt that is also preventing them from being able to meet their mortgage obligations. This option however may leave the homeowner with little negotiating power in terms of modifying their first mortgage. Also, this choice could leave the homeowner with damaged credit. Nonetheless it may be a viable alternative to losing his/her home.

Regardless of the option chosen, the homeowner must weigh the pros and cons of that which is available to him or her. He or she must decide what will give him/her peace of mind as well as a financial situation he/she can manage in light of his/her current financial situation and the economy as a whole. Further, future changes may be in store with a change in political parties that may or may not be beneficial to those in dire financial straits. This must also be considered when making a decision regarding foreclosure and its options.

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