AVOID FORECLOSURE
Are you having trouble keeping up with your mortgage payments? Don't lose your home! Here is some guidance on default and foreclosure prevention.
1. Don't ignore the problem.
The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.
2. Contact your lender as soon as you realize that you have a problem.
Lenders do not want your house. They have options to help borrowers through difficult financial times.
3. Open and respond to all mail from your lender.
The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
4. Know your mortgage rights.
Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.
5. Understand foreclosure prevention options.
Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov/foreclosure/index.cfm.
6. Contact a HUD-approved housing counselor.
The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.
7. Prioritize your spending.
After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.
8. Use your assets.
Do you have assets-a second car, jewelry, a whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.
9. Avoid foreclosure prevention companies.
You don't need to pay fees for foreclosure prevention. Help-use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD approved housing counselor will provide free if you contact them.
10. Don't lose your house to foreclosure recovery scams!
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD approved housing counselor.
Explore loan workout solutions with your lender
If you find you are unable to make your mortgage payments, you might qualify for a loan workout option. Check with your lender to see which option may be available.
If your problem is temporary - call your lender to discuss these possibilities:
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Reinstatement: Your lender is always willing to discuss accepting the total amount owed in a lump sum by a specific date. Forbearance may accompany this option.
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Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time and then agree to another option to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time. The money might come from a hiring bonus, investment, insurance settlement, or tax refund.
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Repayment plan: You may be able to get an agreement to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up.
If keeping your home is not an option - call your lender to discuss these possibilities:
- Sale: If you can no longer afford your home, your lender will usually give you a specific amount of time to find a purchaser and pay off the total amount owed. You will be expected to use the services of a real estate professional who can aggressively market the property.
- Pre-foreclosure sale or short payoff: If you can't sell the property for the full amount of the loan, your lender may accept less than the amount owed. Financial help may also be available to pay other lien holders and/or help towards some moving costs. You may qualify if:
- The loan is at least 2 months delinquent
- You (or your real estate professional) can sell the house within 3 to 5 months
- A new appraisal (obtained by your lender) shows that the value of your home meets HUD program guidelines
- Assumption: A qualified buyer may be allowed to take over your mortgage, even if your original loan documents state that it is non-assumable.
- Deed-in-lieu of foreclosure: As a last resort, you "give back" your property and the debt is forgiven. This will not save your house, but it is less damaging to your credit rating. This option might sound like the easiest way out, but it has limitations:
- You usually have to try to sell the home for its fair market value for at least 90 days before the lender will consider this option
- This option may not be available if you have other liens, such as other creditor judgments, second mortgages, and IRS or state tax liens
Additional Resources:
Avoiding Foreclosure: HUD Massachusetts
Foreclosure Prevention Workshops
*Information provided courtesy of U.S. Department of Housing and Urban Development.