IF YOU MISS MORTGAGE PAYMENTS -
Foreclosure may occur. This is the legal means that your lender
can use to repossess your home. When this happens, you will have
to move out of your house. If your property is worth less than
the total amount you owe on your mortgage loan, your lender or
HUD could seek a deficiency judgment. If that happens, you not
only lose your home, you also would owe an additional debt. A
foreclosure or a deficiency judgment can seriously affect your
ability to qualify for credit in the future. It is important
that you are proactive in avoiding a foreclosure. There are
things that can be done to help yourself.
WHAT YOU SHOULD DO:
1) Do not ignore the letters from your lender.
2) If you are having problems making your payments, contact your
lender immediately and explain your situation.
3) 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.
4) Try to negotiate a plan to get current with your payments.
5) If the lender has turned your account over to their legal
department you should ask to speak to the legal department
and work directly with them to solve your delinquency.
6) It is very important to stay in your home for now. You may
not qualify for assistance if you abandon your property.
7) Contact a HUD-approved housing counseling agency. They have
information on services and programs that could help you.
8) If you bought your home with a Veterans Administration (VA)
guaranteed loan, call the VA office nearest you.
YOUR ALTERNATIVES:
Your options include the following:
A) Special Forbearance: Your lender may arrange a
repayment plan based on your financial situation and even
provide for a temporary reduction or suspension of your
payments. You may qualify for this if you have recently
lost your job or if you had an unexpected increase in living
expenses. In order to get relief from your lender you must
furnish information to show that you would be able to meet the
requirements of the new payment plan.
B) Mortgage Modification: If you haven't already refinanced your
mortgage or extended the term of your mortgage loan you might
want to look into refinancing. This may help you by reducing the
monthly payments to a more affordable level. You may qualify if
you have recovered from a financial problem but your net income
is less than it was before the default on your mortgage.
YOU MAY QUALIFY FOR A PARTIAL CLAIM
IF THE FOLLOWING APPLIES TO YOU:
C) Partial Claim: Your lender may be able to work with
you to get an interest-free loan from HUD to bring your mortgage
current.
If your mortgage loan is at least 4 months delinquent but no
more than 12 months delinquent; your mortgage is not in
foreclosure; and you are able to begin making full mortgage
payments.
When your lender files a Partial claim, HUD will pay your lender
the amount necessary to bring your mortgage current. You will
execute a promissory note, and a specific Lien will be placed on
your property until the promissory note is paid in full. The
promissory note is interest-free but will be due if you sell or
when your mortgage matures.
D) Pre-foreclosure sale. You can sell your property and pay off
your mortgage loan to avoid foreclosure and damage to your
credit rating.
YOU MAY QUALIFY FOR THIS IF:
The "as is" appraised value is at least 70%
of the amount you owe and the sales price is 95% of the
appraised value; your loan is at least 2 months delinquent prior
to the pre- foreclosure sale closing date; and you are able to
sell your house within 3 to 5 months (this depends on your
lender). An additional benefit to this option is the assistance
you will receive with the Seller-paid closing costs.
E) Deed-in-lieu of foreclosure. You may be able to voluntarily
"give back" your
property to the lender. This is a last resort. This won't save
your house, but it will help your chances of getting another
mortgage loan in the future.
YOU CAN QUALIFY FOR THIS IF:
You are in default BUT 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 mortgage in
default.
HOW TO GET HELP TO DETERMINE IF YOU QUALIFY FOR ANY OF THESE
SOLUTIONS:
A housing counseling agency can help you determine which, if
any, of these options may meet your needs. You can and should
discuss your situation with your lender. Very often the lender
can quickly determine what options you have.
BEWARE OF SCAMS:
Solutions that sound too simple or too good to be true usually
are.
If you're selling your home yourself, beware of buyers who try
to rush you through the process. You should obtain the
assistance of professional consultants. There are people who may
try to take advantage of your financial difficulty and some of
them may appear to be upstanding professionals.
TIPS ON HOW TO IDENTIFY A SCAM:
1) Equity skimming is a type of scam. This is when a "buyer"
approaches you, offering to get you out of financial trouble by
paying off your mortgage or giving you a sum of money when the
property is sold. This "buyer" may suggest that you move out
quickly and deed the property to him or her. What usually
happens is the "buyer" then collects rent for a time, does not
make any mortgage payments, and allows the lender to foreclose.
Remember that signing over your deed to someone else does not
relieve you of your obligation on your mortgage loan.
2) Phony counseling agencies can produce scams. There are groups
out there who call themselves "counseling agencies" and may
approach you because they found your foreclosure court recording
in Public Records. They will 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. Before you
allow a counseling agency to help you call a HUD-approved
housing counseling agency. Do this before you pay anyone or sign
anything. This will assure you that the agency is credible and
will do what they say they can do.
PRECAUTIONS YOU CAN TAKE:
To avoid being "taken" by scam artist you should not sign any
papers you don't fully understand. Also, make sure you get all
"promises" in writing. You should beware of any loan assumption
where you are not formally released from liability from your
mortgage debt and any sale contracts. It is best to check with a
lawyer or your mortgage company before entering into any
arrangement involving your mortgage or home. If you sell the house to avoid
foreclosure make sure you check to see if there are any
complaints concerning the prospective buyer(s). The way to
handle this is to contact your state's Attorney General's office
or the State Real Estate Commission for consumer
fraud information.
REMEMBER:
- You don't have to lose your home and damage your credit. You should be proactive and help yourself while you still can.
- Call or write your mortgage lender immediately. Communication is key.
- Stay in your home so you can qualify for assistance.
- Explore your options by making an appointment with a HUD-approved housing counselor.
- Cooperation with the counselor or lender trying to help you is crucial.
- Explore every alternative to losing your home. Don't give up.
- Beware of scams. If it sounds too good it most likely is. If you have any doubts back away.
- Do not sign anything you don't understand. And remember that signing over the deed to someone else does not relieve you of your mortgage loan obligation.
- Act now. Do not delay in getting the help you need. If you do nothing, You will lose your home and your good credit.
Contact the U.S. Department of Housing and Urban Development at
451 7th Street S.W., Washington, DC 20410
Telephone: (202) 708-1112 TTY: (202) 708-1455
