This course will help you learn:
You will know what to do if your mortgage becomes delinquent or if you are facing foreclosure
You will know the options that are available to you
Get involved…take action
43. Homeowners who are experiencing long-term delinquency may need to consider the following: Not Keeping Your Home What Options Do You Have? Acknowledgment: Adapted from HOPENOW Alliance
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Notes de l'éditeur
This course is designed to help you avoid foreclosure and keep your home if you run into trouble. If it is your intention to stay in your home, this is the right course for you.
Please be aware that Springboard does not provide legal or tax advice. This program does not provide legal , tax or accounting advice . Consult a qualified attorney or certified accounting professional if you need legal or tax advice.
Springboard is a 501(c)3 nonprofit organization that has helped thousands of consumers pay off their debts, achieve and preserve homeownership, and become better educated about their personal finances.
Our housing counseling services are approved by the US Department of Housing and Urban Development, and we are a proud partner in the Homeownership Preservation Foundation.
This course will teach you about the options available to you if you are delinquent in your mortgage. We ’ll show you how to take action to avoid foreclosure and keep your home.
Unfortunately, many homeowners still don ’t know that they can contact their lender or a certified housing counselor for help if they are facing foreclosure. The sooner one reaches out for help the easier it is for a housing counselor to help find a workable solution to avoid losing their home.
Some people don ’t reach out for help because they are ashamed or don’t understand how serious the problem is. These days, with millions of people facing financial difficulties and foreclosure on the rise, there is no shame in asking for help. Know that you are not alone if you are facing a financial hardship that threaten your home. We’re doing our part to spread awareness of the options available to help individuals and families facing foreclosure. The government has also responded by creating programs to address the housing crisis.
There are many reasons for foreclosure, including sudden illness, unemployment, or divorce. Whatever the reasons for a homeowner ’s financial difficulties, housing counselors never pass judgment or assess blame; they only want to help, and the earlier a homeowner seeks their assistance, the better.
Foreclosure prevention counseling from a HUD-certified housing counselor is free of charge, so there ’s no reason to wait. Act right away if you think you might have problems paying your mortgage now or in the future.
Before you start to find a workable solution to your problem, you have to understand your situation. We ’ll talk about some of the terminology involved in the foreclosure process; remember, a housing counselor is available to you free of charge if you have any confusion.
Foreclosure means your home will be repossessed by your lender. The lender will then be able to auction off the house to pay for the mortgage. Before they can foreclose, your lender must send letters notifying you of your default, and of their intent to foreclose. A notice of sale establishes the date that the foreclosure sale will take place.
Some of the parties involved in the foreclosure process include the servicer, investor, and insurer. The lender ’s loss mitigation department will work to avoid financial losses on behalf of the lender, and this may include avoiding foreclosure if another solution can be found.
A housing counselor can help you understand all of the relevant terminology as they prepare to negotiate with you and your mortgage lender. Other terms you should familiarize yourself with are collections, delinquency, and hardships.
The timeline for foreclosure proceedings varies by state, but generally, if you go 90 days without making a payment or seeking counseling, your loan will be referred to foreclosure. A housing counselor can tell you more specifically what your timeline would be, depending on local laws. Get help as soon as possible and you ’ll have more options to remedy your situation.
Start by doing some quick budgeting. Figure out how much money you ’d need to be able to make your mortgage payment successfully. Make sure your calculations are accurate, because you’ll be using these numbers to propose a future payment plan or other workout with your lender.
You won ’t be able to come up with a solution to your situation if you cannot create a budget that allows you to meet all of your financial obligations going forward. Consider increasing your income with a second job, part-time employment, adding work hours, or have a family member contribute to the income pool. Be realistic with what you can and can ’ t do.
Talk to your lender and be honest with them. They might be able to make an adjustment to your mortgage agreement that allows you to make your payments going forward. Remember when communicating with your lender to never make promises you cannot keep.
Consider the full range of options available to you; these options will vary depending on how early you seek help, how much you owe on your mortgage, and your specific financial situation.
Commit to the course of action you take to save your home. If the situation changes, react quickly to come up with a different plan for success. It ’s important to keep your homeowners’ insurance policy paid up, and if it’s clear that you won’t be able to save your home, act quickly to sell it or surrender it to your lender before it enters foreclosure.
Always respond when your lender reaches out to you. The best people to talk to are in the Loss Mitigation Department. They ’re used to dealing with borrowers in your situation. Keep detailed records of every communication you have with your mortgage lender, whether that communication is in writing or over the phone..
Be prepared to explain your situation and provide your lender with your financial information, such as your monthly income and expenses. Without this information, they may not be able to help. Stay in your home during the process -- you may not qualify for assistance if you “ walk-away ” from your property. If you choose to rent out your home, it will change it from a primary residence to an investment property. This will most likely disqualify you for any additional “ workout ” assistance from the lender, so be sure that the rental income is enough to help you get your loan current and keep it that way.
Sadly, there are scam artists who take advantage of homeowners facing foreclosure.
A first step toward avoiding scams is to “opt out” of unwanted credit offers and put your phone number on the national Do Not Call list.
HUD-certified housing counselors help you when you reach out to them . Beware of anyone who comes to you offering to help; they could be a scam artist who found out about your foreclosure from public records. Never surrender the title to your home to a third party; always talk to a HUD-certified counselor from a HUD-approved housing counseling agency before agreeing to any plan to avoid foreclosure.
Any documents you are asked to sign should be thoroughly read and fully understood. Ask to show the documents to your housing counselor before you sign. Sometimes a scammer will appear to lend you the money you ’re delinquent, but they’re really purchasing the home for that amount. If you are careless, you might end up signing away your property to a scam artist.
To protect yourself from scams, consult your lender and a housing counselor. They won ’t let you sign away your rights if you involve them in your mortgage workout.
Don ’t assume that your lender is against you; they want to avoid foreclosure as much as you do, because they lose an average of forty to fifty thousand dollars when they foreclose. Contact them as early as possible—even before you miss a mortgage payment—and they will be grateful that you let them help you avoid foreclosure.
Some shady negotiators tell borrowers to deliberately miss payments to make the mortgage negotiation easier. The fact is, you hurt your negotiating position if you make yourself appear to be worse off than you are. If you can set aside some money to put toward your delinquent mortgage, your lender will understand that you are serious about finding a solution to your situation, and they ’ll be more likely to help you.
When you contact a HUD-approved housing counseling agency, you ’ll be able to speak to a qualified counselor who will work directly with you. They will help you review your budget and create an action plan to keep your home, and will even work with you and your lender if necessary. Beware of any housing counselor who tries to charge you a fee for foreclosure prevention assistance. HUD-approved housing counseling of this type should always be available to you free of charge.
Your housing counselor can talk with you about what kind of mortgage you have, and help you document the reasons you fell behind on your mortgage. This information will be needed by your lender before you can come up with a solution.
Talk with a counselor about the causes of your situation, and be honest. The solutions your counselor will propose will change depending on what your situation is. Remember, this process isn ’t about assessing blame or passing judgment. Your counselor needs to know this information so they can help you come up with the best possible solution for you.
While there are many different reasons a borrower defaults on mortgage payments, the important thing is that you made a commitment to saving your home when you reached out for counseling.
Welcome to lesson 2 of our Foreclosure Prevention and Preserving Homeownership course. In the first course, we talked about different causes for loan defaults and the importance of reaching out for help as soon as possible. In this second part, we ’re going to talk about some of the solutions available to you. There are many solutions that may help you avoid foreclosure, and this course is not all-inclusive. Programs may change over time, and new programs are offered throughout the year. We recommend contacting a HUD-approved housing counseling agency such as Springboard for more information on current government and lender sponsored programs.
Some options for saving your home include loan modification, forbearance plans, and other programs that may be offered by your lender or government agencies.
Before you can figure out which possible solution would be best for you, you should begin to create a hardship statement. This statement explains your financial circumstances. A housing counselor can help you write an effective statement or letter. You’ll need to be prepared to share all of your personal financial information with your lender if you expect them to help you. The point of the hardship letter isn’t to point the finger or be defensive. Simply be honest about your situation, how you fell behind, and how you expect to be able to catch up, possibly with the lender’s assistance. Keep the letter itself brief and to the point; lenders are dealing with thousands of homeowners in similar situations, so an overly long hardship letter is not necessary and may hurt your chances of achieving a successful workout. Other documentation to have ready are paystubs, tax returns, bank statements, a breakdown of your debts and obligations, and a list of your assets.
One possible solution to foreclosure is a loan modification. Your lender will agree to change the terms of the original mortgage, which may include reducing your interest rate or principal owed, extending the length of your payment period, and adjusting the amount you owe to include any missed payments. You might find the assistance of a housing counselor helpful when going through the loan modification process, and a good counselor will be able to give you a idea in advance if you are a good candidate for a loan modification.
Your hardship letter should not only include an explanation of your circumstances, but also discuss how you plan to remedy the situation going forward. You need to demonstrate that you understand your situation and are prepared to avoid falling into similar circumstances in the future. Talk about changes you ’ve made to your finances that will make it possible for you to make your new loan payments.
A different option is a Special forbearance, where your lender will agree to suspend or reduce your payments for a set amount of time, after which you ’ll resume regular monthly payments. You may have to make extra payments to make up for the ones you missed, or your loan term may be extended. The specific terms of the forbearance will be made clear to you.
When creating a repayment plan with your lender, you will most likely have to make extra payments in order to make up any delinquent amounts you still owe. Different lenders offer different solutions, so work with a nonprofit housing counselor to find out what options are available to you.
If you are able to refinance your mortgage, you may be able to pay off your delinquent amount and even get lower monthly payments with a lower interest rate. There may be fees and closing costs associated with a mortgage refinance, and if your home ’s value has declined, you may lose some equity. Before agreeing to any refi that is designed to help you avoid foreclosure, be sure to discuss the situation fully with someone at a HUD-approved housing counseling agency.
Private lenders may also have a solution for you. For loans or homeowners not eligible for HASP/HAMP there may be in-house proprietary modifications. These modifications often reflect standards developed in the HASP/HAMP program.
The government offers various mortgage recovery and homeownership programs, but these change frequently and have very specific conditions for eligibility. Mortgage lenders also have their own plans and programs, and these vary from lender to lender. A housing counselor can help you determine which programs you qualify for. Visit Homeownership.org to learn more about the programs that are currently available.
In some cases, saving the home may not be possible. A housing counselor can still help you in this situation, though, since there are ways to give up your property that are less damaging to your personal finances and your credit.
A pre-foreclosure or short sale might help you divest yourself of the property before the foreclosure happens. A short sale involves selling your house for less than what it is worth, so your lender must approve of any short sale in advance. There may be legal or tax implications from short sales that should be discussed with your tax or legal adviser before proceeding with a short sale.
A deed-in-lieu of foreclosure is a last resort where you sign the property over to your lender before it is foreclosed on. You usually have to try to sell your home for 90 days before your lender will consider this option. This is slightly less harmful to your credit rating than a “ foreclosure ” , but it does result in a negative mark on the credit report as do any late or missed mortgage payments.
Another last resort for saving your home is a bankruptcy filing. You can exclude your home from the bankruptcy while wiping out other debts. The income you free up can then be used to make your full mortgage payments. You ’ll need to seek out qualified legal services before proceeding with bankruptcy. If all other options fail, you may find yourself evicted from your property after the foreclosure sale. If you had an FHA loan, ask about the “cash for keys” program, which could provide you with some funds that can help you get into another place to live. This type of program may also be available from private lenders, so contact your lender for more information.
We hope that you enjoyed this course, and we invite you to try our other courses. Springboard is a partner in the homeownership preservation foundation, and is a HUD-approved regional intermediary agency. Visit our Homeownership.org web site for more information.
We have housing counselors standing by to help anyone who has questions about their mortgage situation.