Avoiding Foreclosure

    The possibility of foreclosure can be frightening. Homeowners often feel confused and nervous about the foreclosure process and are not aware of steps they can take to save their home. For homeowners who have missed payments, there are options to help bring their loan current and avoid foreclosure. Addressing the problem promptly is important. Lenders have workout options available for homeowners who seek them out early in the foreclosure process. Follow these tips to avoid scams and take steps to save your home.

    Don't Ignore the Problem

    • Don’t ignore communications from your lender. Ignoring the problem will lead to foreclosure. Don’t be too embarrassed to speak with your lender about your situation. Lenders have options that can help homeowners avoid foreclosure, which is an expensive process for lenders.

    • Read mail from your lender. The first late payment notices will include information on foreclosure prevention.

    • Contact the Loss Mitigation Department of your lending bank or financial institution and explain your situation.

    • Provide your lender with necessary financial information, including any changes in your financial situation, such as job loss. Include your monthly expenses and income, your debts, and your assets.

    • Do not leave your home. Some loan modifications and assistance require you to live in your home.

    • Contact a nonprofit credit counseling service approved by the U.S. Department of Housing and Urban Development (HUD) to explore your options.

    Know Your Mortgage Rights

    • Read your loan documents to determine what steps your lender may take if you miss payments.

    • Your mortgage rights differ from state to state. Foreclosure timelines also differ by state. Contact the government housing office in your state to learn about your rights.

    • Your federal mortgage rights are based in sections 6 and 10 of the Real Estate Settlement Procedures Act, or RESPA. You may have additional rights or responsibilities depending on your state of residence.

    • If your loan servicer sells your loan to another company, it must give you 15 days’ notice before the transfer. The notice will include your new servicer’s contact information, insurance coverage transfer information, the transfer date, and the date your new servicer will start to accept payments. The notice should also state that the transfer does not change any condition of your mortgage other than the terms related to servicing the loan.

    • In the 60 days after the transfer to a new loan servicer, if you accidentally send your payment to the old servicer, it may not be considered late and you may not be penalized.

    • You are not required under RESPA to have an escrow account. If your lender requires you to have an escrow account, RESPA does require that your lender or servicer pay your property taxes and insurance on time to avoid late payment charges. RESPA also has maximum limits on the amount your servicer may require you to maintain in the escrow account.

    • Your loan servicer must respond to your questions or problems. Write a letter to your servicer and mail it separately from your payment. On your correspondence, write “qualified written request under Section of RESPA.” Your servicer will have 60 business days to respond.

    Understanding your Options

    • Talk to a housing HUD-approved counselor . These counselors can tell you if you are eligible for assistance under the Homeowner Affordability and Stability Plan, a Making Home Affordable modification of your loan, or other assistance.

    • If you are having temporary difficulty keeping your mortgage current, you may qualify for a loan workout option. Contact your lender to find out your options.

    • Some workout options include forbearance (reduced or suspended payments for a certain time until you can make your loan current), reinstatement (often combined with forbearance, you pay the total late amount by a certain date), and repayment plans (payment plans to pay your monthly payments plus late payments).

    • If you are permanently unable to pay your mortgage or to bring your account current, you may be able to negotiate a mortgage modification with your lender. Your lender may change part of your original loan agreement, such as your interest rate, adding your missed payments to the loan balance, or extending the term of your loan to make the monthly payments more affordable. You may also consider a claim advance, an interest-free loan from your mortgage guarantor if your loan is insured.

    • Another option is a pre-foreclosure sale. You will sell your home for less than the amount owed on your mortgage. This does not allow you to keep your home, but you can avoid foreclosure.

    • A deed-in-lieu of foreclosure allows you to return your property to your lender. You will not be able to keep your home but can avoid foreclosure.

    Using Your Assets

    • Take an inventory of your assets. Financial assets include securities, bank balances, stocks and bonds. Non-financial assets include real property and personal property, such as cars or boats.

    • Investigate options for selling your personal property, such as jewelry or a second car in order to make your mortgage payments.

    • Consider cashing in a whole life insurance policy.

    • Look for a second job or part-time work to earn extra income.

    • Reexamine your budget to determine optional expenses, such as cable television or gym memberships, that you can cut. Use this money to pay your mortgage.

    • Show your lender that you are trying to save your home by making sacrifices. These steps may not provide you with enough money to bring your loan current, but they will demonstrate your effort to do so.

    Foreclosure Prevention Companies

    • Avoid private for-profit companies that charge fees. Mortgage counseling services approved by the HUD are free and provided by nonprofit counseling agencies funded by the government.

    • Avoid companies that promise to stop your foreclosure and claim to have amazing success rates or guarantees.

    • Do not pay fees to a “foreclosure rescue company” or other group that promises to save your home or to get you a new mortgage. Often these companies charge large fees and then stop taking your calls.

    • Do not send your mortgage payment to anyone other than your lender. Some scam companies offer to “handle” your payments and are only interested in stealing your money.

    • Some scam companies may tell you to skip payments or to stop contacting your lender. Do not do this. Continue communication with your lender and, if possible, make your payments -- even in situations when the advice is coming from a legitimate company.

    • Check out any company with the Better Business Bureau and HUD before you do business with it. Scammers call themselves “foreclosure consultants,” “mortgage consultants,” “foreclosure prevention,” or “foreclosure rescue” companies.

    Avoiding Foreclosure Prevention Scams

    • Your mortgage lender publishes a notice in local papers before it forecloses on your home. Scammers read these notices to find their targets. Be aware of foreclosure notices about your home so you can avoid these scammers.

    • Scammers advertise on radio, television, the Internet, and in newspapers. Do not assume that all advertised companies are legitimate.

    • Look out for “phishing” pages on the web. Some scammers create pages that appear to be government websites in order to get your personal information, to imitate approved credit counseling services, or to offer fake refinancing or modification programs. Type the web address of the government site you wish to visit directly into your browser.

    • Scammers may approach you by phone, mail, e-mail, or in person. Legitimate government entities will not contact you directly and will not charge you fees.

    • Do not open unsolicited e-mails. Do not click on any links or open attachments in unsolicited e-mails that claim to be from government agencies or loss-mitigation companies.

    • Avoid scam counselors or home buyers who pressure you to transfer your deed to them. These scammers will promise to allow you to continue to live in your home and pay rent in order to buy it back from them. These scammers will own your home and take your money with no intention of giving you back your house. Often they will take your money and allow the lender to foreclose on the home. Signing away your deed does not relieve you of your obligation to your lender.

    • Some scammers offer to give you fake legal advice that will allow you to argue that you have no obligation to pay your loan. Do not stop making payments on your loan.

    • If you are the victim of a scam, file a complaint with the Federal Trade Commission at 1-877-FTC-HELP.

    Resources

    • Tips to Avoid Foreclosure: This HUD page discusses options to avoid foreclosure and advice for those who cannot keep their homes. Also includes information on how to find approved counseling agencies in your state.

    • Counseling Services: Hope Now is recommended by the HUD and offers free counseling services. Site also includes information on the Making Home Affordable plan.

    • Making Home Affordable: Information on the federal Making Home Affordable program. Also includes resources for requesting loan modifications and on finding housing counselors.

    • Foreclosure Resources: U.S. Financial Literacy and Education Commission provides links to comprehensive resources on home ownership, including avoiding foreclosure, from member federal agencies.

    • Avoiding Scams: U.S. Comptroller of the Currency provides tips to help consumers recognize and avoid foreclose prevention scams.

    • Foreclosure Counselors: Contact information for HUD-partnered foreclosure counselors and information on how to recognize and avoid scams.

    • Consumer Tips: Information on avoiding foreclosure and scams. Also includes help finding legal representation and information for tenants living in foreclosed homes.

    • Foreclosure Prevention Options: Fannie Mae offers information and guidance to struggling homeowners and provides information on foreclosure prevention events around the country.

    • Avoiding Foreclosure: Freddie Mac answers frequently asked questions about the foreclosure process and tips on how to find a counselor and avoid foreclosure.

    • Consumer Resources: The Federal Reserve Board provides links to government agencies that can help homeowners avoid foreclosure.

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