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Facing foreclosure, finding solutions

How one woman found help

Northwest Counseling Service helped Sandra Farley keep her house in the Overbrook neighborhood of west Philadelphia.

Farley, 55, bought the house in 1996. In April of last year, she lost her job as an office assistant. Unable to find work, she quickly fell behind on her mortgage.

Like many people in her situation, Farley didn't respond to the late payment notices her lender sent out. In September she got a foreclosure letter, along with an Act 91 notice, a form required by the state of Pennsylvania that lists the names and contact information of housing counselors. She remembered hearing good things about Northwest Counseling Service, so she decided to give them a try.

Northwest counselors Bessie Tanksley and Michael Delorma helped her gather the information she needed -- bills, her budget and documentation of her income -- to make the case for a mortgage modification. At a conciliation hearing -- a type of court hearing set up by Philadelphia as the last backstop before a sheriff sale -- a Northwest representative helped her negotiate a deal with her lender, Citi Residential Lending.

The deal not only gave her a forbearance but also turned her adjustable-rate mortgage into a fixed-rate mortgage that cut her interest rate from 12.3 percent to 5 percent. As a result, Farley's monthly payment went from $654 to $478, allowing her to pay her mortgage comfortably on her new salary as a child care professional.

In addition to helping her navigate the complexities of the financial system, Farley says the counselors helped her deal with the fear and anxiety associated with nearly losing her home.

"One day, in the beginning, I left and I was so upset," she says. "They called me at home: 'Ms. Farley, are you OK?' They didn't have to do that. It meant a lot."

Is she glad she got counseling?

"Absolutely," she says. "I really couldn't afford an attorney, so it's one of the best options out there."

Is your problem short-term or long-term?

Mortgage servicers offer two broad types of workouts, depending upon whether the borrower's troubles are short-term or long-term. Before negotiating with a mortgage servicer, you should know which category your problem belongs to.

Sometimes it's easy to know the difference. Koches, of Ocwen, cites the hypothetical example of someone who has to pay an emergency medical bill. "Maybe for a relatively short period -- a month or three months -- they're under tremendous pressure," says Koches. "We full well understand that if a homeowner needs to address a serious medical problem, they're going to deploy their available cash to getting themselves back on their feet ... clearly, there are short-term disruptions that call out for forbearance."

In other cases, the borrower might become permanently disabled, get divorced or become widowed. Those usually are long-term problems. Throw in a sharply higher rate on an adjustable-rate mortgage, and it can turn into a crisis.

Sometimes it's hard to know how long a problem will last. A layoff might result in a one-week job search, or a yearlong hunt. An injury or illness could linger longer than expected. In such cases, it's still a good idea to get in touch with the servicer.

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Tip: Each situation is unique. Understand your situation before agreeing to a plan.

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