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How to Avoid Foreclosure
Related:
judicial foreclosure, repossession, bank
respossession, lien on property, eviction,
deed in lieu of foreclosure
T he
guidance below is applicable to homeowners
with FHA Insured loans. While a good deal of
this information may apply to all homeowners
in danger of losing their homes, not all of
the foreclosure avoidance tools mentioned
may be available to you if you have a VA or
conventional loan. Additionally, HUD/FHA
does not have any Loss Mitigation oversight
over VA or conventional loans. Please
contact your lender or a housing counseling
agency.
Q: What Happens When I Miss My Mortgage
Payments?
Foreclosure may occur. This is the legal
means that your lender can use to repossess
(take over) your home. When this happens,
you must move out of your house. If your
property is worth less than the total amount
you owe on your mortgage loan, a deficiency
judgment could be pursued. If that happens,
you not only lose your home, you also would
owe HUD an additional amount.
Both foreclosures and deficiency
judgments could seriously affect your
ability to qualify for credit in the future.
So you should avoid foreclosure if possible.
Q: What Should I Do?
- DO NOT IGNORE THE LETTERS FROM YOUR
LENDER. If you are having problems
making your payments, call or write to
your lender's Loss Mitigation Department
without delay. Explain your situation.
Be prepared to provide them with
financial information, such as your
monthly income and expenses. Without
this information, they may not be able
to help.
- Stay in your home for now. You may
not qualify for assistance if you
abandon your property.
- Contact a HUD-approved
housing counseling agency. Call
(800) 569-4287 or TDD (800)
877-8339 for the housing counseling
agency nearest you. These agencies are
valuable resources. They frequently have
information on services and programs
offered by Government agencies as well
as private and community organizations
that could help you. The housing
counseling agency may also offer credit
counseling. These services are usually
free of charge.
Q: What Are My Alternatives?
You may be considered for the following:
Special Forbearance. Your lender
may be able to arrange a repayment plan
based on your financial situation and
may even provide for a temporary
reduction or suspension of your
payments. You may qualify for this if
you have recently experienced a
reduction in income or an increase in
living expenses. You must furnish
information to your lender to show that
you would be able to meet the
requirements of the new payment plan.
Mortgage Modification. You may be
able to refinance the debt and/or extend
the term of your mortgage loan. This may
help you catch up by reducing the
monthly payments to a more affordable
level. You may qualify if you have
recovered from a financial problem and
can afford the new payment amount.
Partial Claim. Your lender may be
able to work with you to obtain a
one-time payment from the FHA-Insurance
fund to bring your mortgage current.
You may qualify if:
- your loan is at least 4 months
delinquent but no more than 12
months delinquent;
- you are able to begin making
full mortgage payments.
When your lender files a Partial
Claim, the U.S. Department of Housing
and Urban Development will pay your
lender the amount necessary to bring
your mortgage current. You must execute
a Promissory Note, and a Lien will be
placed on your property until the
Promissory Note is paid in full.
The Promissory Note is interest-free
and is due when you pay off the first
mortgage or when you sell the property.
Pre-foreclosure sale. This will
allow you to avoid foreclosure by
selling your property for an amount less
than the amount necessary to pay off
your mortgage loan.
You may qualify if:
- the loan is at least 2 months
delinquent;
- you are able to sell your house
within 3 to 5 months; and
- a new appraisal (that your
lender will obtain) shows that the
value of your home meets HUD program
guidelines.
Deed-in-lieu of foreclosure. As a
last resort, you may be able to
voluntarily "give back" your property to
the lender. This won't save your house,
but it is not as damaging to your credit
rating as a foreclosure.
You may qualify if:
- you are in default and don't
qualify for any of the other
options;
- your attempts at selling the
house before foreclosure were
unsuccessful; and
- you don't have another FHA
mortgage in default.
Q: How Do I Know if I Qualify for Any of
These Alternatives?
Your lender will determine if you qualify
for any of the alternatives. A housing
counseling agency can also help you
determine which, if any, of these options
may meet your needs and also assist you in
interacting with your lender. Call (800)
569-4287 or TDD (800) 877-8339.
Q: Should I Be Aware of Anything Else?
Yes. Beware of scams! Solutions that
sound too simple or too good to be true
usually are. If you're selling your home
without professional guidance, beware of
buyers who try to rush you through the
process. Unfortunately, there are people who
may try to take advantage of your financial
difficulty. Be especially alert to the
following:
Equity skimming. In this type of
scam, a "buyer" approaches you, offering
to get you out of financial trouble by
promising to pay off your mortgage or
give you a sum of money when the
property is sold. The "buyer" may
suggest that you move out quickly and
deed the property to him or her. The
"buyer" then collects rent for a time,
does not make any mortgage payments, and
allows the lender to foreclose.
Remember, signing over your deed to
someone else does not necessarily
relieve you of your obligation on your
loan.
Phony counseling agencies. Some
groups calling themselves "counseling
agencies" may approach you and offer to
perform certain services for a fee.
These could well be services you could
do for yourself for free, such as
negotiating a new payment plan with your
lender, or pursuing a pre-foreclosure
sale. If you have any doubt about paying
for such services, call a HUD-approved
housing counseling agency at
(800) 569-4287 or TDD (800)
877-8339. Do this before you pay
anyone or sign anything.
Q: Are There Any Precautions I Can Take?
Here are several precautions that should
help you avoid being "taken" by a scam
artist:
- Don't sign any papers you don't
fully understand.
- Make sure you get all "promises" in
writing.
- Beware of any contract of sale of
loan assumption where you are not
formally released from liability for
your mortgage debt.
- Check with a lawyer or your mortgage
company before entering into any deal
involving your home.
- If you're selling the house yourself
to avoid foreclosure, check to see if
there are any complaints against the
prospective buyer. You can contact your
state's Attorney General, the State Real
Estate Commission, or the local District
Attorney's Consumer Fraud Unit for this
type of information.
Q: What Are the Main Points I Should
Remember?
- Don't lose your home and damage your
credit history.
- Call or write your mortgage lender
immediately and be honest about your
financial situation.
- Stay in your home to make sure you
qualify for assistance.
- Arrange an appointment with a
HUD-approved housing counselor to
explore your options at (800)
569-4287 or TDD (800) 877-8339.
- Cooperate with the counselor or
lender trying to help you.
- Explore every alternative to keep
your home.
- Beware of scams.
- Do not sign anything you don't
understand. And remember that signing
over the deed to someone else does not
necessarily relieve you of your loan
obligation.
Act now. Delaying can't help. If you do
nothing, YOU WILL LOSE YOUR HOME and your
good credit rating. |
