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, 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!
Q:
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.
- Contact
a HUD-approved agent. They have information on services and
programs that could help you. The housing counseling agency
may also offer credit counseling. These services are usually
free of charge.
- If
you bought your home with a Veterans Administration (VA)
guaranteed loan, call the VA office nearest you.
Q:
What are my alternatives?
Your options
include 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:
1.
your loan is at least 4 months delinquent but no more than
12 months delinquent;
2.
your mortgage is not in foreclosure; and
3.
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 and pay
off your mortgage loan to avoid foreclosure and damage to your
credit rating.
You may qualify if:
1.
the "as is" appraised value is at least 70% of
the amount you owe and the sales price is 95% of the appraised
value;
2.
the loan is at least 2 months delinquent prior to the pre-
foreclosure sale closing date; and
3.
you are able to sell your house within 3 to 5 months
(depending on what your lender agrees to).
An
additional benefit to this option is the assistance you will
receive with the Seller-paid closing costs.
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 can qualify if:
1.
you are in default and don't qualify for any of the other
options;
2.
your attempts at selling the house before foreclosure were
unsuccessful; and
3.
you don't have another FHA mortgage in default.
Q:
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.
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. 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.
If you have any doubt about paying for such services call a
HUD-approved Agent. 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 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.
Q:
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.
- Arrange
an appointment with a HUD approved agent to explore your
options.
- Cooperate
with the counselor or lender trying to help you.
- Explore
every alternative to losing 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.
- Act
now. Delaying can't help. If you do nothing, You will lose
your home and your good credit rating
