How to Avoid Foreclosure

Are you having trouble keeping up with your mortgage payments? Have you received a notice from your lender asking you to contact them? Here are some tips to help you.

Instructions

Difficulty: Moderately Easy

1. First and foremost, don't ignore the problem.
   
   The further behind you become, the harder it will be to reinstate your loan. Contact your lender because lenders really do not want your house and have options to help borrowers through difficult financial times.
2. Open and respond to all mail from your lender.
   
   The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later on you will get scarier looking mail that will include important notice of pending legal action. Although you may not want to face it, failure to open the mail will not be an excuse in foreclosure court. So, if you have let the situation get to this point, do something about it now. There are more things that you can do to help yourself than you realize, so keep reading.
   
   Do not be embarrassed or try to hide from the situation. There is help out there.
3. Know your mortgage rights.
   
   Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and time frames in your state (as every state is different) by contacting the State Government Housing Office.
4. Use your assets.
   
   Do you have assets like a second car, jewelry, or a whole life insurance policy that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.
5. Contact a HUD-approved housing counselor.
   
   The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance. Find a HUD-approved housing counselor near you or call [phone] or TTY [phone].
6. If Your Problem Is Temporary - Call Your Lender and know these terms.
   
   Reinstatement: Your lender is always willing to discuss accepting the total amount owed to them in a lump sum by a specific date. They will often combine this option with a Forbearance.
   
   Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time after which another option must be agreed upon to bring your loan current. A forbearance option is often combined with a Reinstatement when you know you will have enough money to bring the account current at a specific time in the future. The money might come from a hiring bonus, investment, insurance settlement, or a tax refund.
   
   Repayment Plan: You may be able to get an agreement to resume making your regular monthly payments, in addition to a portion of the past due payments each month until you are caught up.
   
   If it appears that your situation is long-term or will permanently affect your ability to bring your account current:
   
   Mortgage Modification: If you can make the payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to change one or more terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:
   
   Adding the missed payments to the existing loan balance.
   Changing the interest rate, including making an adjustable rate into a fixed rate.
   Extending the number of years you have to repay.
   
   
   Claim Advance: If your mortgage is insured, you may qualify for an interest-free loan from your mortgage guarantor to bring your account current. The repayment of this loan may be delayed for several years.
7. If you can no longer afford your home, your lender will usually agree to give you a specific amount of time to find a purchaser and pay off the total amount owed. You will be expected to obtain the services of a real estate professional who can aggressively market the property.
   
   If the property's sales value is not enough to pay the loan in full, which seems to be the most common problem now, your lender may be able to accept less than the full amount owed. This option can also include a period of time to allow your real estate agent to market the property and find a qualified buyer. Monetary help may also be available to pay other lien holders and/or help toward paying a few moving costs.
   
   Also, most people don't know this but a qualified buyer may be allowed to assume your mortgage, even if your original loan documents state that it is non-assumable. Selling your home to a sibling or parent may be an option so that you can remain in your home, but stay there as a renter instead.
   
   Your lender may agree to allow you to voluntarily give back your property and forgive the debt. Although this option sounds like the easiest way out for you, you must attempt to sell the home for its fair market value for at least 90 days before the lender will consider this option. Also, this option may not be available if you have other liens such as judgments of other creditors, second mortgages, and IRS or State Tax liens. This is why it is so important to tackle the problem right away before it becomes a problem you can no longer help.
8. A lot of people don't realize that you don't need to pay fees for foreclosure prevention help. Use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD approved housing counselor will provide free if you contact them.
9. A lot of people are not aware that if your property has been damaged by a natural disaster or if you have been called up for active military duty or affected by a national tragedy, such as the terrorist acts of September 11, 2001, there may be additional assistance available.
   
   Call HUD and let them know that you are a servicemen and women with questions concerning your mortgage. For more information, call (800) CALL-FHA / [phone].
10. After health care, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.
    
    Remember this is only temporary until you can get back on your feet and you can always get these things back after you save your house.
11. Lastly, don't fall for foreclosure scams. If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice.

Tips & Warnings

• Beware of Scams: - Equity skimming: a buyer offers to repay the mortgage or sell the property if you sign over the deed and move out. - Phony counseling agencies: offer counseling for a fee when it is often given at no charge. - Do not sign anything you do not understand. It is your right and duty to ask questions. - Information is your best defense against becoming a victim of predatory lending especially for a desperate homeowner!