Avoiding Foreclosure Tips

1. DO NOT IGNORE MAIL FROM YOUR LENDER
If you do not contact your lender, your lender will try to contact you
by mail and phone soon after you stop making payments. It is very
important that you respond to the mail and the phone calls offering
help. If your lender does not hear from you they will be required to
start legal action leading to foreclosure. This will substantially increase
the cost of bringing your loan current.
2. TALK TO A HOUSING COUNSELING AGENCY
If you don’t feel comfortable talking with your lender, you should immediately
contact a HUD-approved housing counseling agency and
arrange an appointment with a counselor. A counselor will help you
assess your financial situation, determine what options are available
to you, and help you negotiate with your lender. A counselor will be
familiar with the various workout arrangements that lenders will consider
and will know what course of action makes the most sense for
you and your family, based on your circumstances. In addition, the
counselor can call the lender with you or on your behalf to discuss a
workout plan. By meeting with a counselor before your mortgage
payments are too far behind, you can protect yourself from future
credit problems.
A good counselor will help you establish a monthly budget plan to
ensure that you can meet all of your monthly expenses, including
your mortgage payment. Your personal financial plan will clearly
show how much money you have available to make the mortgage
payment. This analysis will help you and your lender determine
whether a reduced or delayed payment schedule could help you.
Also, a counselor will have information on services, resources, and
programs available in your local area that may provide you with additional
financial, legal, medical or other assistance that you may need.
To find out more about HUD-approved housing counseling agencies
and their services, please call (800) 569-4287 on weekdays between
9:00 a.m. and 5:00 p.m. ET (6:00 a.m. to 2:00 p.m. PT). You can also
get an automated referral to the three housing counseling agencies
located closest to you by calling (800) 569-4287.
Such agencies provide free, or very low-cost assistance.
3. PRIORITIZE YOUR DEBTS
For the unemployed, getting by will require a new, tightened budget.
Prioritize your bills and pay those most necessary for your family:
food, utilities and shelter.
Failing to pay any of your debts can seriously affect your credit rating.
However, if you stop making your mortgage payments you could
lose your house. Whenever possible, any income available after paying
for food and utilities should be used to pay your monthly mortgage
payments. If your employment income has been stopped or reduced,
first consider eliminating or reducing your other expenses
(such as dining out, entertainment, cable, or even telephone services).
If that does not provide enough income, consider using other
financial resources like stocks, savings accounts, or personal property
that may have value like a boat or a second car. Take any responsible
action that will save cash.
In addition to speaking with your lender, you may want to contact a
nonprofit consumer credit counseling agency that specializes in providing
help in restructuring credit payments. Credit counselors can
often reduce your monthly bills by negotiating reduced payments or
long-term payment plans with your creditors. The majority of credit
counseling agencies are reputable and provide their services free of
charge or for a small monthly administrative fee tied to a repayment
plan. Beware of credit counseling agencies that offer counseling for
a large upfront fee or donation.
When you call a consumer credit counseling agency, you will be
asked to provide current information about your income and expenses.
Make sure you ask if the agency has a charge before you
sign any documents!
4. PRESERVE YOUR GOOD CREDIT
First and foremost, if you can keep your mortgage current, do so.
However, if you find that you are unable to make your mortgage
payments, you may qualify for a loan workout option. Check with
your lender to find out which of these options may be available.
5. IF YOUR PROBLEM IS TEMPORARY, CALL YOUR LENDER
• Reinstatement: Your lender is always willing to discuss accepting
the total amount owed to them in a lump sum by a specific date.
They will often combine this option with a Forbearance.
• Forbearance: Your lender may allow you to reduce or suspend
payments for a short period of time after which another option
must be agreed upon 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 in the future. The money might come from a hiring bonus, investment,
insurance settlement, or a tax refund.
• Repayment Plan: You may be able to get an agreement to resume
making your regular monthly payments, in addition to a portion of
the past due payments each month until you are caught up.
If it appears that your situation is long-term or will permanently affect
your ability to bring your account current:
Mortgage Modification: If you can make the payments on your loan,
but you do not have enough money to bring your account current or
you cannot afford the total amount of your current payment, your
lender may be able to change one or more terms of your original loan
to make the payments more affordable. Your loan could be permanently
changed in one or more of the following ways:
• Adding the missed payments to the existing loan balance.
• Changing the interest rate, including making an adjustable
rate into a fixed rate.
• Extending the number of years you have to repay.
6. IF KEEPING YOUR HOME IS NOT AN OPTION CALL YOUR
LENDER
• Sale: If you can no longer afford your home, your lender will
usually agree to give you a specific amount of time to find a
purchaser and pay off the total amount owed. You will be expected
to obtain the services of a real estate professional
who can aggressively market the property.
• Pre-Foreclosure Sale or Short Payoff: If the property’s sales
value is not enough to pay the loan in full, your lender may
be able to accept less than the full amount owed. This option
can also include a period of time to allow your real estate
agent to market the property and find a qualified buyer.
Monetary help may also be available to pay other lien holders
and/or help toward paying a few moving costs.
• Assumption: A qualified buyer may be allowed to assume
your mortgage, even if your original loan documents state
that it is non-assumable.
• Deed-in-lieu: Your lender may agree to allow you to voluntarily
“give back” your property and forgive the debt. Although
this option sounds like the easiest way out for you, generally,
you must attempt to sell the home for its fair market value for
at least 90 days before the lender will consider this option.
Also, this option may not be available if you have other liens
such as judgments of other creditors, second mortgages,
and IRS or State Tax liens.
Avoid predatory lenders, and/or lending scams. Deal only with
banks or institutions you are familiar with.
Many mortgage lenders will bend over backwards to assist you so
that you can work things out, and you won’t lose your home.
Believe it or not, lenders DO NOT want your home!
Foreclosure is very expensive and time consuming for your bank or
mortgage company.
By moving now, seeking help, and working with your lender, you can
save yourself a lot of trouble, embarrassment and heartache.
On the following page is a list of lenders that will work with you.
If you’re lender is on the list, CONTACT THEM AT ONCE!