Foreclosure First Aid Kit

If your mortgage loan is delinquent, in default, or in foreclosure, or if you suspect mortgage loan servicer's error and/or predatory lending,we will try to help you to find affordable options, alternatives, and a long term solution to your problem.

Frequently Asked Questions

Q: What happens when I miss my mortgage payments?

Q: What exactly is foreclosure, and when does it start?

Q: Does foreclosure mean that we will lose our home?

Q: What should I do?

Q: What are my alternatives?

Q: How do I know if I qualify for any of these alternatives?

Q: Should I be aware of anything else?

Q: Are there any precautions I can take?

Q: What are the main points I should remember?

What happens when I miss my mortgage payments?

Foreclosure may occur. This is the legal means that your lender can use to repossess (take back or force the sale of) 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, your lender or HUD could seek a deficiency judgment. If that happens, you not only lose your home, you also would owe your lender or HUD an additional debt. Foreclosure or a deficiency judgment could seriously affect your ability to qualify for credit in the future. So you should avoid it if all possible!

What should I do?

Do not ignore the letters from your lender.

If you are having problems making your payments, contact your lender immediately. 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. If you bought your home with a Veterans Administration (VA) guaranteed loan, call the VA office nearest you.

What are my options?

Your options may include one or more of the following:

Special forbearance

Your lender may be able to arrange a repayment plan based on your financial situation. Your lender may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently lost your job or your source of income or if you had an unexpected 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 but your net income is less than it was before the default (failure to pay).

Partial claim.

Your lender may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current. You may qualify if your 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 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 will be due if you sell or leave your property, or when your mortgage matures.

Pre-foreclosure sale.

This will allow you to sell your property before SHERIFF'S SALE and pay off your mortgage loan to avoid foreclosure and further damage to your credit rating.

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 will help your chances of getting another mortgage loan in the future. You may 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. Homeowners often will be tempted to turn over their deed to the creditor instead of fighting the foreclosure. This is generally a good idea only if the borrower will receive something from the creditor in return for saving it the trouble of foreclosing. For example, if the home's value exceeds the amount of the indebtedness, the homeowner may want to ask the creditor to agree not to seek further collection remedies. By turning over the deed to the mortgage holder, the consumer may forfeit any right to equity in the home. Similarly, the consumer may have valid claims or defenses against the creditor that would be lost by turning over the deed. If the consumer does offer the creditor a deed in lieu of foreclosure, make sure that there is a written agreement giving them sufficient time to vacate the premises in order to find alternative housing and move in an orderly fashion.

How do I know if I qualify for any of these alternatives?

A housing counseling agency can help you determine which, if any, of these options may meet your needs. You should also discuss the situation with your lender's collection, loss mitigation, or loan resolution department.

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 that 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.

Are there any precautions I can take?

Here are several precautions that should help you avoid being "taken" by scam artist:

Don't sign any papers you don't fully understand.
Make sure you get all "promises" in writing.
Beware of any loan assumption where you are not formally released from liability for your mortgage debt and contracts of sale.
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.

What are the main points I should remember?

Don't lose your home and damage your credit history if you can help it.

Call or write your mortgage lender immediately.
Stay in your home to make sure you qualify for assistance.
Explore your options and every alternative to losing your home.
Beware of scams.
Do not sign anything you don't understand.
Remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.
Act now. Delaying can't help. If you do nothing, You will lose your home and your good credit rating.

What exactly is foreclosure, and when does it start?

The foreclosure process differs from state to state. Whenever you ask about mortgage foreclosure, it's important to know the particular laws and customs that apply. Generally, in a judicial proceeding (judicial vs. nonjudicial) after a Borrower defaults to the terms and conditions of their mortgage loan agreement, foreclosure is the legal means that the mortgage lender may use to force the repayment of the debt you incur when you borrow money with a loan secured by a mortgage on your home. Once a lender declares that your loan is in default, the loan may be accelerated (which means that the entire balance of the loan must be repaid immediately, usually within 30 days). In some states, before the lender can initiate foreclosure, the law requires that the lender issue the borrower a NOTICE OF INTENT TO FORECLOSE, giving the borrower a prescribed period of time to cure the default. If the borrower is unable to cure the default, and loan isn't repaid within 30 days, foreclosure is initiated when the lender directs their attorney to file a lawsuit.

Does foreclosure mean that we will lose our home?

Possibly, but not necessarily. Most people who are forced to leave their homes probably didn't understand the foreclosure process, they probably didn't know about their options, and they were probably too afraid, too embarrassed, or didn't know where to get the help that they needed.