New foreclosures rose 21.1 percent during the third quarter of 2011, the latest data available from the U.S. Office of the Comptroller of the Currency (OCC). The rise in foreclosures was due to mortgage loan servicers moving forward with foreclosure proceedings after taking a break last year to review how troubled loans were being handled.
Mortgage servicers trying alternatives to foreclosure
"Servicers continued to emphasize alternatives to foreclosure during the third quarter, initiating more than two-and-a-half times as many new home retention actions -- loan modifications, trial-period plans, and payment plans -- as completed foreclosures, short sales, and deed-in-lieu-of-foreclosure transactions," according to the OCC report.
Among the measures servicers took to help troubled borrowers were modifications, trial-period plans and payment plans. Nearly 90 percent of all loan modifications during the third quarter of 2011 reduced borrowers' monthly payments, reported the OCC.
Talk with your loan servicer if you think you might be eligible for a modification. Keep in mind, however, that not all loan modifications are the same, and the terms vary based upon individual circumstances.
Applying for a refinance
For homeowners who don't qualify for a modification, there still could be hope that you might qualify for a refinance even if you were previously turned down for a loan. Yes, it may be discouraging to think about applying for a refinance and being denied a second time. But if your financial situation has changed for the better, you actually may have a greater chance of being approved than before.
If any of the following have occurred since you were turned down for a refinance, you might consider applying again:
- Your income has risen. Mortgage lenders want to know that you have a steady and stable source of income. If you have started a new job or gotten a significant raise, it may be time to reconsider applying for refinancing.
- Your credit score has improved. Lenders are scrutinizing applications of potential borrowers but may be ready to take you seriously as a potential borrower if you have worked to boost your credit score.
- You have more home equity. Even though a lot of homeowners have lost significant equity in their homes during the housing crisis, not everyone is underwater. If you've managed to boost your equity since you last applied for a refinance -- either by paying down your balance or if home prices have risen in your neighborhood -- it may work in your favor.
- You've been making on-time payments. Paying all your bills on time each month shows that you are responsible for your money.
- You have cash to bring to closing. Some homeowners are boosting their equity stake at closing by bringing cash to the table. Doing so just might tip the scales in your favor with a mortgage lender.
Take a chance on applying
It is hard to know if you will get approved for refinancing until you actually begin contacting mortgage lenders. Do not make the mistake of not applying based upon what happened a year ago. If your financial situation has changed significantly, it may be time to revisit the idea of refinancing your mortgage loan.