Home Foreclosure Help
If you've received foreclosure notices on your mortgage, don't panic. Here's a helpful list of ways you can sort out your finances and prevent foreclosure.
If you've received a letter from your bank threatening you with foreclosure, you may start to panic. A vast list of desperate questions might come to mind: "How did I get into this situation? What happens now? Will I lose my home? Is there anything I can do?"
Some people choose to bury their heads in the sand and simply throw the notices away. Unfortunately, such strategies only postpone the inevitable: The situation isn't going away, and ignoring it will only make it worse. Rather than surrendering to fear and resigning yourself to losing your home, be brave and ask yourself some tough questions: What can I do to prevent this foreclosure from happening? How do I save my home?
Your Bank's Not the Bad Guy
Remember when you first sat down with your bank to discuss the possibility of a mortgage? You'll no doubt remember their willingness to help you secure the right deal and to facilitate the purchase of your home. Now that you're facing foreclosure, you think your bank is the bad guy, hell-bent on taking away your home and leaving you on the streets. In reality, your bank doesn't want to take your home. It isn't in their best interests. Foreclosure affects their bottom line, and ultimately costs them more than working with you to remedy the situation.
Believe it or not, your bank will be willing to work with you and find the best solution to prevent you from foreclosing. The key is to contact them at the earliest possible time and discuss your options.
Many people don't realize that you don't need to wait until you've missed a mortgage payment to contact your lender. In fact, you should consider reaching out as soon as your financial situation changes and you realize that you are likely to miss payments.
There's a chance your lender will be willing to modify your mortgage in the short term to lower your payments or even grant you a special forbearance that suspends your payments. This second option is more likely if you can show that your financial difficulties are temporary and that your situation will return to normal shortly.
Can You Make the Missed Payment?
While the exact time frames surrounding a foreclosure differ from situation to situation, lenders typically start the process after three to five months of missed payments. You may receive a letter or phone call from your lender if your payment is just 30 days late, but this does not automatically mean you are in foreclosure. At this point, you still have several options.
Your first option (and simplest one, depending on your financial situation) is to make the payment and bring your mortgage account back up to date. This measure should be enough to keep your credit score intact, and that's something to consider. If you go into foreclosure, your credit score will take a serious hit, reducing your options for new housing if the worst does happen.
Know Your Rights
Look through your original mortgage agreement and read what it says about missed/late payments and the potential consequences. Also, contact your local Government Housing Office to get more information about laws and timeframes in your state. The legalities are different in every state, so make sure you get the right information for your state. Knowing the technicalities and calling out any errors on the part of your mortgage lender could end up saving your home.
Beware Of Foreclosure Prevention Scams
Some companies will tell you they can stop your impending foreclosure immediately. All you have to do is sign a document appointing them to act on your behalf, and all your worries will disappear.
Unfortunately, there are unscrupulous individuals out there who don't hesitate to take advantage of vulnerable people. Not all companies claiming to help you are equally trustworthy, and you need to be careful about where you spend your money and whom you trust. Emergency mortgage assistance programs are free of charge, so beware of companies offering to negotiate with your lenders for a hefty fee. While they may be legitimate businesses, they are for-profit companies, and they make significant sums of money off the confusion and fear that surround foreclosure. Don't let them exploit you!
If you do talk to a Company that promises assistance, do not sign anything that you don't understand. Always seek advice from an attorney or an HUD-approved housing counselor before making any decisions or signing any paperwork. You could end up signing over the title of your property to one of these companies and find yourself a tenant in your home.
Reach Out To an HUD-Approved Counselor
Mortgages are complicated things, and you will probably need professional advice on how to proceed. If you don't feel comfortable talking to your lender, there's a network of counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) that can help you figure out your situation.
These housing counselors are free or very low-cost and can help you understand the law and your options. They can also help you organize your finances and represent you in negotiations with your lender.
Do You Have An FHA-insured Loan?
Borrowers with FHA-insured loans can take advantage of something called a "Partial Claim." With this option, you receive a one-time, interest-free loan to help you get your mortgage account back on track. You do not need to repay the loan until you pay off your first mortgage or sell your house.
Another option is the FHA Home Affordable Mortgage Program (HAMP), which enhances the Partial Claim to include enough to cover your mortgage arrears and pay off up to 30% of your balance, lowering your future monthly payments.
Prioritize Your Spending
Take a good look at your finances and see which expenses you can cut back to help you make your mortgage payments. Focus especially on your optional expenses, such as cable TV, internet services, gym memberships, etc. You can cancel most of these services without incurring a penalty, and you can start them up again once you are in a better financial position.
If you've got unsecured debts, like credit cards and store cards, then consider postponing payments on them until after you've made your mortgage payment. While these debts are obviously still important, you're not going to lose your home if you don't prioritize them.
Liquidate Any Assets You Might Have
Maybe you've got a car, some jewelry or even a life insurance policy that you can sell to get some cash. It might sound drastic, but if it prevents you from losing your home, won't it be worth it? Do not move too quickly, but if you know you're going to have issues with payments, it's worth reviewing your disposable assets and assessing what they're worth and how hard it would be to liquidate them. At least you'll know your options.
The Last Word
A foreclosure notice is a traumatic event, but it's not the end. There are several options available to those facing foreclosure. The crucial point to remember is to acknowledge, and deal with, any notes from your lender. Reaching out to them early on can prevent the situation from escalating and give you a greater chance of keeping your home. It's important not to panic or go into denial. There are still many options open to you, so keep a clear head and decide how best to save yourself. Never panic, and never give up!