The 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.
Foreclosure Help Question #1:
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 try stopping foreclosure if possible.
Foreclosure Help Question #2:
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.
Foreclosure Help Question #3:
What Are My Alternatives?
You may be considered for the following:
Stopping Foreclosure Alternative
#1: 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.
Stopping Foreclosure Alternative
#2: 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.
Stopping Foreclosure Alternative
#3: 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.
Stopping Foreclosure Alternative
#4: 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.
Stopping Foreclosure Alternative
#5: 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 can 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.
Foreclosure Help Question #4:
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.
Foreclosure Help Question #5:
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.
Foreclosure Help Question #6:
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.
Foreclosure Help Question #7:
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.
Stop forclosure now. Delaying can't help. If you do nothing,
YOU WILL LOSE YOUR HOME and your good credit rating.
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