You Can Avoid Foreclosure and Keep Your Home

Losing a home can be financially and personally devastating. Here's information to help you keep your home. Relief may be available.

• People facing money problems:
  
  If you are facing unemployment or have money problems, you may be able to keep your home if you know the right steps to take. Read on for important information and links to local organizations that can help you get through difficult times without losing your home. Government organizations and the mortgage industry worked together to provide this information to help you keep your home.
  
   
• Disaster area victims:
  
  If you live or work in an area declared a disaster by the President and the hurricane, tornado, flood, wildfire, or other natural or man-made event damaged your home or reduced your income, your lender will provide disaster relief:
   
  • For 90 days on an FHA-insured loan. Go to the Disaster Help from the button on the left of this page.
  • In most cases for other loans.
  
   
• Military personnel and spouses:
  
  If you or your spouse is on active military duty, you may qualify for a reduction in your interest rate resulting in lower payments. Read how the Service members Civil Relief Act of 2003 (formerly the Soldiers' and Sailors' Civil Relief Act of 1940) affects military homeowners.

Facing Money Problems:

Financial problems are most often associated with major life changes like:

• Job loss
• Cuts in work hours or overtime
• Retirement
• Illness, injury, or death of a family member
• Divorce or separation

If your family is facing any of these issues and you can't pay your bills, look closely at what you owe and what you earn. Eliminate unnecessary spending and reach out for help if you still can't make ends meet. Taking action right away can help you protect your family from the loss of your home.

Steps to take when you can't pay your mortgage: -

Contact your lender as soon as you have a problem
Talk to a housing counselor
Prioritize your debts
Explore loan workout solutions with your lender
If keeping your home is not an option
Beware of predatory lending schemes

1. Contact your lender as soon as you have a problem -

Many people avoid calling lenders about money troubles because we:
• Feel embarrassed discussing money problems with others
• Believe that if lenders know we are in trouble, they will automatically rush to a collection agency or foreclosure (seize property for failure to pay a mortgage debt)

But lenders want to help borrowers keep their homes because:
• Foreclosure is expensive for lenders, mortgage insurers and investors
• HUD and private mortgage insurance companies and investors like Freddie Mac and Fannie Mae require lenders to work aggressively to help borrowers facing money problems

Lenders have workout options (choices) to help you and:
• These options work best when your loan is only one or two payments behind
• The farther behind you are on your payments, the fewer options are available

Don't assume that your problems will quickly correct themselves:
• Don't lose valuable time being overly optimistic
• Contact your mortgage lender to discuss your circumstances as soon as you realize that you're unable to make your payments
• Look forward to your lender being willing to explore many possible solutions, without guaranteeing any one particular solution
  
  Finding your lender
  
  Check the following sources to contact your lender:
  • Your monthly mortgage billing statement
  • Your payment coupon book

 
Information to have ready when you call

To help you, lenders usually need:
• Your loan account number
• A brief explanation of your circumstances
• Recent income documents:
  • Pay stubs
  • Benefit statements from Social Security, disability, unemployment, retirement, or public assistance
  • Tax returns or a year-to-date profit and loss statement, if self-employed
  • A list of household expenses

Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a "loan workout" package. This package contains information, forms and instructions. If you want to be considered for assistance you must complete the forms fully and truthfully and return them to your lender quickly. Your lender will review the complete package before talking about a solution with you.

CALL YOUR LENDER TODAY! The sooner you call, the sooner help is available.

Don't ignore mail from your lender

If you don't get in touch with your lender, your lender will try to contact you by mail and phone soon after you stop making payments. It is very important that you respond to mail and phone calls offering help. If your lender doesn't hear from you, they will have to start legal action leading to foreclosure. This will greatly increase the cost to bring your loan current.

Information for families with FHA loans

The FHA provides many alternatives and ways for borrowers to get help. These may include mortgage modifications (changes), special forbearances (allowances), and other actions you can take to avoid foreclosure.

FHA works closely with customers who have FHA-insured loans. Do you feel your lender is not responding to your questions? Do you need help contacting your lender? The FHA is ready to help! Contact us at (800) CALL-FHA.

2. Talk to a housing counselor - 

If you don't feel comfortable talking with your lender, you should immediately contact a housing counseling agency and make an appointment with a counselor. Most FHA counselors are free or cost very little. A counselor can help you:

• Review your financial situation, determine what options are available to you, and negotiate with your lender
• Learn which of the various workout arrangements lenders consider makes the most sense for you and your family, based on your circumstances
• Call the lender with you or on your behalf to discuss a workout plan
• Protect you from future credit problems before you get too far behind on mortgage payments
• Give you information on services and programs in your area that provide financial, legal, medical or other assistance

A good counselor will help you create a monthly budget plan to ensure you meet all your monthly expenses, including your mortgage payment. Your personal financial plan will clearly show how much money you have available to make the mortgage payment. This analysis will help you and your lender determine whether a reduced or delayed payment schedule could help you.

To find out more about HUD-approved housing counseling agencies and their services, please call toll free (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern Standard Time (6:00 a.m. to 2:00 p.m. Pacific Time). The same number can give you an automated referral to the three housing counseling agencies located closest to you.

Many of these local housing counseling agencies are connected with national and regional housing counseling intermediaries (mediators). The website for HUD-approved National and Regional Housing Counseling Intermediaries describes the full range of assistance offered and provides maps showing their member's locations.

3. Prioritize your debts (rank them by importance)

You will need a new, tightened budget if you lose a job. Prioritize your bills and pay those most necessary for your family: food, utilities and shelter.

Failing to pay any of your debts can seriously affect your credit rating, but if you stop making your mortgage payments you could lose your house. Try these suggestions to keep your home:

• Whenever possible, use any income available after paying for food and utilities to pay your monthly mortgage payments.
• If your employment income has stopped or been reduced, first consider getting rid of or cutting back on other expenses (such as dining out, entertainment, cable, or even telephone services).
• If you still do not have enough income, consider cashing out other financial resources like stocks, savings accounts, or personal property that may have value like a boat or a second car.
• Take any responsible action that will save cash.
   

Besides speaking with your lender, you may want to contact a nonprofit consumer credit counseling agency that specializes in helping restructure credit payments. Credit counselors can often reduce your monthly bills by negotiating lower payments or long-term payment plans with your creditors. Trustworthy credit counseling agencies provide their services free of charge or for a small monthly fee tied to a repayment plan. Beware of credit counseling agencies that offer counseling for a large upfront fee or donation.

For consumer debt advice, contact www.debtadvice.org/

When you call a credit counseling agency, they will ask you to provide current information about your income and expenses. Make sure you ask if the agency has a charge before you sign any documents!

Preserve your good credit

Do not underestimate (misjudge) how important it is to keep your good credit. Your future ability to purchase items, rent or buy a home, and do other things often requires a credit check. Consumer credit agencies and your lender can help you explore solutions to keep your credit rating from getting blemished.

Maintaining good credit is even important for job hunters. When you apply for a job, the employer probably will check your credit report to determine whether:

• You have been sued
• You have filed for bankruptcy
• You have trouble paying your bills

First and foremost, if you can keep your mortgage current, do so.
But if you find you are unable to make your mortgage payments, you might qualify for a loan workout option. Check with your lender to see which option may be available. Some options may not apply to your loan if it is not insured by FHA.

If your problem is temporary - call your lender to discuss these possibilities:

• Reinstatement: Your lender is always willing to discuss accepting the total amount owed in a lump sum by a specific date. Forbearance may accompany this option.
• Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time and then agree to another option 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. The money might come from a hiring bonus, investment, insurance settlement, or tax refund.
• Repayment plan: You may be able to get an agreement to resume making your regular monthly payments, plus 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 - call your lender to discuss options:

• Mortgage modification: If you can make payments on your loan, but don't have enough money to bring your account current or you can't afford your current payment, your lender may be able to change the 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.
• Partial Claim: If your mortgage is insured, your lender might help you get a one-time interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan. You qualify for an FHA partial claim if:
  • Your loan is between 4 and 12 months delinquent
  • You are able to begin making full mortgage payments again

When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must sign 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 is due when you pay off the first mortgage or when you sell the property.

If keeping your home is not an option - call your lender to discuss these possibilities:

• Sale: If you can no longer afford your home, your lender will usually give you a specific amount of time to find a purchaser and pay off the total amount owed. You will be expected to use the services of a real estate professional who can aggressively market the property.
• Pre-foreclosure sale or short payoff: If you can't sell the property for the full amount of the loan, your lender may accept less than the amount owed. Financial help may also be available to pay other lien holders and/or help towards some moving costs. You may qualify if:
  • The loan is at least 2 months delinquent
  • You (or your real estate professional) can sell the house within 3 to 5 months
  • A new appraisal (obtained by your lender) shows that the value of your home meets HUD program guidelines
• Assumption: A qualified buyer may be allowed to take over your mortgage, even if your original loan documents state that it is non-assumable.
• Deed-in-lieu of foreclosure: As a last resort, you "give back" your property and the debt is forgiven. This will not save your house, but it is less damaging to your credit rating. This option might sound like the easiest way out, but it has limitations:
  • You usually have to try to sell the home for its fair market value for at least 90 days before the lender will consider this option
  • This option may not be available if you have other liens, such as other creditor judgments, second mortgages, and IRS or state tax liens

If you need to sell your home, you'll have to answer many questions. You'll need to find how much your house is actually worth, and you'll have to find a real estate agent you are comfortable with. The following resources may help:

• National Association of Realtors
• National Association of Real Estate Brokers
• International Real Estate Digest
• National Association of Hispanic Real Estate Professionals
• The Home Store

If you have an FHA-insured loan and your lender is not responsive

Your lender has to follow FHA servicing guidelines and regulations for FHA-insured loans. If your lender is not cooperative, contact FHA's National Servicing Center at toll free (888) 297-8685 or via email hsg-lossmit@hud.gov. HUD does not oversee VA or conventional loans.

Beware of predatory lending schemes 

Most mortgage lenders are trustworthy and provide a valuable service by allowing families to own a home without saving enough money to buy it outright. But dishonest or "predatory" lenders do exist and engage in lending practices that increase the chances that a borrower will lose a home to foreclosure. Beware especially of those who make high risk second mortgages. Other abusive practices include:

• Making a mortgage loan to an individual who does not have the income to repay it
• Charging excessive interest, points and fees
• Repeatedly refinancing a loan without providing any real value to the borrower

Borrowers facing unemployment and/or foreclosure are often targets of predatory lenders because they are desperate to find any "solution".

Homeowners receive many refinance offers in the mail saying they are "pre-approved" for credit based on the equity in their homes. Borrowing against your house may seem attractive when you are struggling to pay your mortgage and other bills. But stop and think about this: if you can't make your current payments, increasing your debt will make it harder to keep your home, even if you get some temporary cash.

Beware of scams

• Equity skimming: In this type of scam a "buyer" approaches you offering to repay the mortgage or sell the property if you sign over the deed and move out - usually leaving you with the debt and no house. Signing over your deed does not necessarily relieve you of the responsibility of paying the loan.
• Phony counseling agencies: charging for counseling that is often free of charge. If you have any doubt about paying for such services, call a HUD-approved foreclosure housing counseling agency toll free at (800) 569-4287 or TDD (800) 877-8339 before you pay anyone or sign anything.
• 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

Where to report suspected predatory lending

Homeowners can either visit the Stop Mortgage Fraud website or call toll free (800) 348-3931 to get information on what steps to take to file a complaint. Homeowners who call will also receive a booklet containing information found on the website.

For more information about predatory lending go to:

• Freddie MAC's Predatory Lending
• Freddie MAC's "Don't Borrow Trouble"

Common Questions

What happens when I miss my mortgage payments?

Foreclosure may occur. This means your lender can legally 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, a deficiency judgment could be pursued, meaning you would not only lose your home, you also would owe HUD money.

Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if at all possible.

What should I do?

• Do not ignore letters from your lender. If you are having problems making your payments, call or write to your lender's loss mitigation department immediately. Explain your situation. Be prepared to provide financial information, such as you-r 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 foreclosure housing counseling agency. Call toll free 1-800-569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They have information on services and programs offered by government agencies and private and community organizations that might be able to help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.

Who is my lender? How do I make contact?

Look at your monthly mortgage coupons or billing statements for the lender's name and contact information.

I don't remember what type of mortgage I have. How can I find this information?

Look on the original mortgage documents or call your mortgage lender.

Do I need to keep living in my house to qualify for assistance?

Usually yes, but call your lender to discuss your specific circumstances and get advice on options that may be available.

My employer has already announced layoffs in the coming month. What can I do now?

You have started learning about available options here. Now, figure out if a layoff will make it hard for your family to make your mortgage payments. If so, consider other resources you have to pay your mortgage. Review your spending habits and see where you can reduce spending. If you have a lot of other debt, consider contacting a nonprofit, consumer credit counseling agency. Take advantage of any help your employer offers. If you still believe you will have trouble making your mortgage payments, contact your lender right away.

What are the key points to remember?

1. Don't lose your home and damage your credit history
2. Call or write your mortgage lender immediately and be honest about your financial situation
3. Stay in your home to make sure you qualify for assistance
4. Arrange an appointment with a HUD-approved housing counselor to explore your options toll free at (800) 569-4287 or TDD (800) 877-8339
5. Cooperate with the counselor or lender trying to help you
6. Explore every alternative to keep your home
7. Beware of scams
8. Never 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
9. Act now. Delaying can't help. If you do nothing, you will lose your home and your good credit rating!

What precautions can I take?

These precautions can help you avoid being "taken" by a scam artist:

• Don't sign any papers you don't fully understand.
• Make sure you get all "promises" in writing.
• Beware of any sales contract that assumes the loan where you are not formally released from liability (responsibility) for your mortgage debt.
• 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.

Will I be responsible for any out-of-pocket expenses if I am approved for a workout option?

You may have to pay expenses such as recording fees for a loan modification. Because every situation is different, contact your lender for more information. But, if a lender has no contact with you and has to start foreclosure, you may have to pay very high legal fees. To avoid this, call your lender as soon as you realize you might have trouble.

Mortgage lenders

The mortgage lenders listed below have voluntarily joined the federal government to assist homeowners who are concerned about the future or have suffered due to recent changes in the economy. If your lender is listed here, you can help protect your home by contacting them immediately!

This information is provide for you by the joint efforts of HUD/FHA, Department of Veterans Affairs, Department of Labor, Fannie Mae, Freddie Mac, members of the Mortgage Industry-at-large, and other industry participants.

Servicemembers Civil Relief Act (SCRA) Common Questions

Reservists, guardsmen and other military personnel can find answers to questions about mortgage payment relief and protection from foreclosure provided by the Servicemembers Civil Relief Act of 2003 (formerly The Soldiers' and Sailors' Civil Relief Act of 1940).

Who is eligible?

The Act applies to active duty military personnel who had a mortgage obligation before enlistment or before being ordered to active duty. This includes:

• Members of the Army, Navy, Marine Corps, Air Force, Coast Guard
• Commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration engaged in active service
• Reservists ordered to report for military service
• People ordered to report for induction (training) under the Military Selective Service Act
• Guardsmen called to active service for more than 30 consecutive days.

In limited situations, dependents of servicemembers are also entitled to protections.

Am I entitled to debt payment relief?

The Act limits interest that may be charged on mortgages taken out by a servicemember (including debts incurred jointly with a spouse) before he or she entered into active military service. At your request, lenders must reduce the interest rate to no more than 6% per year during the period of active military service and recalculate your payments to reflect the lower rate. This provision applies to both conventional and government-insured mortgages.

Is the interest rate limitation automatic?

No. To ask for this temporary interest rate reduction, you must submit a written request to your mortgage lender and include a copy of your military orders. The request may be submitted as soon as the orders are issued, but no later than 180 days after the date of your release from active duty military service.

Am I eligible even if I can afford to pay my mortgage at a higher interest rate?

If a mortgage lender believes that military service has not affected your ability to repay your mortgage, they have the right to ask a court to grant relief from the interest rate reduction. This is does not happen very often.

What if I can't afford to pay my mortgage even at the lower rate?

Your mortgage lender may let you stop paying the principal amount due on your loan during active duty service. Lenders are not required to do this but they generally try to work with servicemembers to keep them in their homes. You will still owe this amount, but will not have to repay it until after you complete active duty service.

Most lenders also have other programs to assist borrowers who can't make their mortgage payments. If you or your spouse finds yourself in this position at any time before or after active duty service, contact your lender immediately and ask about loss mitigation options. If you have an FHA-insured loan and are having difficulty making mortgage payments, you may also be eligible for special forbearance and other loss mitigation options.

Am I protected against foreclosure?

Mortgage lenders may not foreclose while you are on active duty or within 90 days after military service without court approval., A lender would be required to show in court that your ability to repay the debt was not affected by your military service.

What information do I need to provide to my lender?

When you or your representative contacts your mortgage lender, you should provide the following information:

• Notice that you have been called to active duty
• A copy of the orders from the military notifying you of your activation
• Your FHA case number
• Evidence that the debt precedes your activation date

HUD has reminded FHA lenders of their obligation to follow the SCRA. When notified that a borrower is on active military duty, an FHA lender must inform the borrower or representative of the adjusted payment amount due, provide adjusted coupons or billings, and ensure adjusted payments are not considered insufficient payments.

Will my payments change later? Will I need to pay back the interest rate "subsidy" at a later date?

The change in interest rate is not a subsidy. Interest in excess of 6% per year that would otherwise have been charged is forgiven. However, the reduction in the interest rate and monthly payment amount only applies during the period of active duty. Once the period of active military service ends, the interest rate will revert back to the original interest rate, and payments will be recalculated accordingly.

How long does the benefit last? Does the period begin and end with my tour of duty?

Interest rate reductions are only for the period of active military service. Other benefits, such as postponement (delaying) of monthly principal payments on the loan and restrictions on foreclosure, may begin immediately upon assignment to active military service and end on the third month following the term of active duty assignment.

How can I learn more about relief available to active duty military personnel?

Servicemembers who have questions about the SCRA or the protections they may be entitled to, can contact their unit judge advocate or installation legal assistance officer. Dependents of servicemembers can also contact or visit local military legal assistance offices where they live. A military legal assistance office locator for each branch of the armed forces is available at www.legalassistance.law.af.mil/content/locator.php