How To Avoid Foreclosure

IF YOU MISS MORTGAGE PAYMENTS - Foreclosure may occur. This is the legal means that your lender can use to repossess your home. When this happens, you will have to 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 an additional debt. A foreclosure or a deficiency judgment can seriously affect your ability to qualify for credit in the future. It is important that you are proactive in avoiding a foreclosure. There are things that can
be done to help yourself.


1) Do not ignore the letters from your lender.

2) If you are having problems making your payments, contact your lender immediately and explain your situation.

3) 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.

4) Try to negotiate a plan to get current with your payments. 5) If the lender has turned your account over to their legal department you should ask to  speak to the legal department and work directly with them to solve your delinquency.

6) It is very important to stay in your home for now. You may not qualify for assistance if you abandon your property.

7) Contact a HUD-approved housing counseling agency. They have information on services and programs that could help you.

8) If you bought your home with a Veterans Administration (VA) guaranteed loan, call the VA office nearest you.


Your options include the following:

A) Special Forbearance: Your lender may arrange a  repayment plan based on your financial situation and even provide for a temporary  reduction or suspension of your payments. You may qualify for this if you have recently
lost your job or if you had an unexpected increase in living expenses. In order to get relief  from your lender you must furnish information to show that you would be able to meet the requirements of the new payment plan.

B) Mortgage Modification: If you haven't already refinanced your mortgage or extended the term of your mortgage loan you might want to look into refinancing. This may help you 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 on your mortgage.


C) Partial Claim: Your lender may be able to work with you to get an interest-free loan from HUD to bring your mortgage current.

If your mortgage 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 will execute a promissory note, and a specific Lien will be placed on your property until the promissory note is paid in full. The promissory note is interest-free but will be due if you sell or when your mortgage matures.

D) Pre-foreclosure sale. You can sell your property and pay off your mortgage loan to avoid foreclosure and damage to your credit rating.


The "as is" appraised value is at least 70% of the amount you owe and the sales price is 95% of the appraised value; your loan is at least 2 months delinquent prior to the pre- foreclosure sale closing date; and you are able to sell your house within 3 to 5 months (this depends on your lender). An additional benefit to this option is the assistance you will receive with the Seller-paid closing costs.

E) Deed-in-lieu of foreclosure. You may be able to voluntarily "give back" your
property to the lender. This is a last resort. This won't save your house, but it will help your chances of getting another mortgage loan in the future.


You are in default BUT 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 mortgage in default.


A housing counseling agency can help you determine which, if any, of these options may meet your needs. You can and should discuss your situation with your lender. Very often the lender can quickly determine what options you have.


Solutions that sound too simple or too good to be true usually are.
If you're selling your home yourself, beware of buyers who try to rush you through the process. You should obtain the assistance of professional consultants. There are people who may try to take advantage of your financial difficulty and some of them may appear to be upstanding professionals.


1) Equity skimming is a type of scam. This is when a "buyer" approaches you, offering to get you out of financial trouble by paying off your mortgage or giving you a sum of money when the property is sold. This "buyer" may suggest that you move out quickly and deed the property to him or her. What usually happens is 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 relieve you of your obligation on your mortgage loan.

2) Phony counseling agencies can produce scams. There are groups out there who call themselves "counseling agencies" and may approach you because they found your foreclosure court recording in Public Records. They will 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. Before you allow a counseling agency to help you call a HUD-approved housing counseling agency. Do this before you pay anyone or sign anything. This will assure you that the agency is credible and will do what they say they can do.


To avoid being "taken" by scam artist you should not sign any papers you don't fully understand. Also, make sure you get all "promises" in writing. You should beware of any loan assumption where you are not formally release from liability from your mortgage debt and any sale contracts. It is best to check with a lawyer or your mortgage company before entering into any arrangement involving your mortgage or home. If you sell the house to avoid foreclosure make sure you check to see if there are any complaints concerning the prospective buyer(s). Best way to handle this is to contact your state's Attorney General's office or the State Real Estate Commission for consumer
fraud information.


* You don't have to lose your home and damage your credit. You should be proactive and help yourself while you still can.

* Call or write your mortgage lender immediately. Communication is key.

* Stay in your home so you can qualify for assistance.

* Explore your options by making an appointment with a HUD-approved housing counselor.

* Cooperation with the counselor or lender trying to help you is crucial.

* Explore every alternative to losing your home. Don't give up.

* Beware of scams. If it sounds too good it most likely is. If you have any doubts back away.

* Do not sign anything you don't understand. And remember that signing over the deed to someone else does not relieve you of your mortgage loan obligation.

* Act now. Do not delay in getting the help you need. If you do nothing, You will lose your home and your good credit.

Contact the U.S. Department of Housing and Urban Development at
451 7th Street S.W., Washington, DC 20410
Telephone: (202) 708-1112 TTY: (202) 708-1455

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