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.
Contact your lender for details about your particular loan. "We
Buy Houses" signs are everywere, avoid foreclosure
and don't lose your home equity to home buying scams.
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 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.
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("We Buy Houses" Signs). 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.
If the home has a lot of equity in
it the "skimmer" will
sell the home, pay off back debts on the home, and keep the
equity you could have had if you sold it yourself.
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
ConsumerFraud Unit for this type of information.
[Read related article: Avoid
Home Foreclosure]
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.
[Click Here to Read The Article on Financial Disasters
& Download Assistance Forms]
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