Foreclosure is a very common phenomenon in most communities as a result of the recent sub-prime mortgage meltdown. For those with sub-prime mortgages that reset to exorbitant rates, it is a confusing and depressing time. Don't give up hope. Here are a few steps you can take to avoid home foreclosure. 1. As soon as you start falling behind by one or two months, contact your mortgage holder or lender to find out what options you have available to you. Do not wait until you start receiving threatening mail from the lender.
Lender contact information should be listed on your payment coupon book or your mortgage statement. Your lender may refer to the team who can assist you by names like " Loss Mitigation Department" or "Default Resolution Team". You may have to call more than once and/or speak to supervisors if necessary. The key is to be persistent.
2.Request a loan workout from your mortgage lender. A loan workout is a restructure of the loan. Examples of options that may be available to you depending on your situation and the lender include:
Forbearance - The lender allows you to reduce or suspend payment for a short period of time and then accept some other payment arrangement that will bring the loan current.
Repayment plan - allowing you to make current payment plus a portion of the past due amount until caught up.
Mortgage modification - When you can make monthly payments but can't afford the current monthly payment, the lender can redo the terms, interest rate amount, type of interest rate, ARM (adjustable rate mortgage) to fixed rate for example, or number of years over which the loan can be repaid.
According to HUD, "these options work best when your loan is only one or two payments behind." The farther behind you are with your payments, the fewer options are available to you.
3. Complete any loan workout paperwork your lender sends your way and provide proof of income and anything else they ask for in support of the loan workout application.
Keep in mind that your goal is two-fold.
(i) should be to convince the lender that can and will pay on the renegotiated loan and
(ii) negotiate the most favorable terms without giving up your legal rights and of course avoid losing your home.
Do not move at this time as you may not qualify for any assistance if you vacate the premises.
4. Finally, if you do not find your lender nonresponsive or need additional assistance with this whole process, contact HUD for a list of HUD-approved foreclosure housing counseling agencies who can walk you through the process.
Call toll free 1-800-569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you.
In Summary, avoid losing your home to foreclosure and messing up your credit history by trying to get a loan workout agreement from your lender.
1. Contact your mortgage lender as soon as possible to apprise them of your situation and determine what options are available.
2. Be persistent
3. Contact a HUD-approved housing counselor to help you with your options and the paperwork involved if your lender is not responsive or the process is too complicated for you. Call HUD toll free on (800) 569-4287 or TDD (800) 877-8339
4. Provide any back up documentation the counselor or lender requests to support your loan workout request
5. Convince the lender you can and will pay the renegotiated loan
6. Do not vacate your home to make sure you qualify for assistance.
7. Make sure you get everything in writing and do not sign anything you do not understand until you do.
