Stop Foreclosure
PROTECTING
AMERICA'S
HOMEOWNERS
Stop Home Foreclosure
How To Stop Foreclosure - Step By Step
HOW TO STOP FORECLOSURE:
Top 10 Tips For Homeowners Who Are Facing Foreclosure
If you are unable to make your mortgage payment:
1. Don't ignore the problem.
The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.
2. Contact your lender as soon as you realize that you have a problem.
Lenders do not want your house. They have options to help borrowers through difficult financial times.
3. 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 mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
4. 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 timeframes in your state (as every state is different) by contacting the State Government Housing Office.
5. Understand foreclosure prevention options.
Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov.
6. Contact a non-profit housing counselor.
The U.S. Department of Housing and Urban Development 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.
7. Prioritize your spending.
After healthcare, 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.
8. Use your assets.
Do you have assets-a second car, jewelry, 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.
9. Avoid foreclosure prevention companies.
Many for-profit companies will contact you promising to negotiate a loan work out 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 for free if you contact them. You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead.
10. Don't lose your house to foreclosure recovery 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 from an attorney, a HUD approved housing counselor or trusted real estate professional.
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In the next sections we will go into more detail on each of these tips including a step-by-step guide to avoiding foreclosure
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Foreclosure Home | Avoiding Foreclosure - Part 1
Avoiding Foreclosure - The Critical 1st Step:
The most important first step you must take when you fall behind on your mortgage payments is to contact your lender immediately. DO NOT IGNORE the letters and phone calls from your lender. If you're having trouble making your payments don't wait for them to call you - call them. I mean right NOW! Time is crucial. This is the most common mistake homeowners make when they get behind on their payments. Do not pretend that your situation is not serious or that your problems will quickly correct themselves.
Many people avoid calling their lenders when they have money troubles. In fact, studies suggest that 40 to 50% of all the people who go into foreclosure never have any contact with their lender after the first missed payment. This is a mistake. Most of us are embarrassed to discuss our money problems with others or believe that if lenders know we are in trouble, they will rush to collection or foreclosure. This is false.
Contrary to what you may believe lenders want to help borrowers keep their homes. Why? Because foreclosure is an expensive process for lenders, mortgage insurers, and investors. Fact is most lenders that actually do foreclose end up losing money on the deal. Because of that fact lenders tend to work aggressively with borrowers who are facing money problems. That is an important point to understand - that they do not want your home. They only want your monthly loan payments and the interest that comes with it.
Don’t lose valuable time by being overly optimistic. Contact your mortgage lender to discuss your circumstances as soon as you realize that you are unable to make your payments. While there is no guarantee that any particular relief will be given, most lenders are willing to explore every possible option with you.
Lenders have several workout options to help you stop home foreclosure and stay put. They go by many names* – forbearance, mortgage modification, partial claim, and payment suspension to name a few. However, 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. Contact them as soon as possible to discuss possible solutions.
How to Find Your Lender
Check the following sources for lender contact info:
• Your monthly mortgage billing statement
• Your payment coupon book
• Web links or customer service phone numbers found on the internet
Information You Should Have Ready When You Call
To help you, lenders typically need:
• Your loan account number found on your statement or coupon book
• A brief explanation of your circumstances. Be honest with them
• A list of your household expenses
• You may be asked to provide recent income documents
When you call your lender ask to speak with a manager instead of the front-line operator who is only looking to collect your back payments. Grab a pad of paper and jot down the time and day of your call, the name of the person you spoke to, and what was discussed. Don’t forget to ask for a direct-line phone number of the person you spoke to so you can re-contact that individual without having to go through the annoying automated phone menu.
Understand that foreclosure is a legal process and you have rights as a homeowner. It is important to learn how much time you have to work with before losing ownership of your home. You can find the foreclosure timeline for the state you live in at:
www.foreclosurelaw.org
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 and return them to your lender quickly. The completed package will be reviewed before the lender talks about a solution with you. Make sure you follow through on this since it will buy you more time.
The bottom line here is to call your lender today. Remember - you don’t want to lose your home and they don’t want to take it. * For a free glossary of mortgage terms go to:
www.hud.gov/offices/hsg/sfh/buying/glossary.cfm
This resource will enable you to understand some of the terminology you lender will use when speaking with you.
Stop Foreclosure Step 2:
Contact the Department Of Housing And Urban Development to discuss counseling about your options. They can be reached toll-free at 1-800-569-4287.
What If I'm Already In Foreclosure?
If you're already in foreclosure contact the Home Preservation Foundation at 1-888-995-HOPE.
Foreclosure Home | Avoiding Foreclosure - Part 2
Legal Protection
It is important early in the foreclosure process to contact an attorney. You don't have to face foreclosure alone; there is professional help available. An experienced attorney can help you determine your best options, explain your legal rights, and avoid the key mistakes revealed on this site.
Try to locate an attorney who is easily accessible and will speak to you directly, instead of through a paralegal. Make sure you find one who is experienced in foreclosure cases. If you contact an attorney who is not experienced in foreclosures ask if they can refer you to another lawyer who is. If you are worried about your ability to pay an attorney ask them up front if they offer any payment options. Some of them will be willing to work with you.
To find a qualified attorney try here: www.naca.net
{National Association of Consumer Advocates} or call them at (202)452-1989
Information For Families With FHA Loans
If you presently have an FHA loan there are professional advisors available to assist you. If you’re not sure if your loan is an FHA loan review your loan document package you should have received at closing. If you cannot locate the package simply call your lender and ask them.
The Federal Housing Administration (FHA) provides a wide range of relief options for borrowers in trouble. There are many alternatives and ways to get help. These may include FHA managed mortgage modifications, special forbearances, and other actions you can take to stop home foreclosure.
HUD’S National Servicing Center works closely with customers who have FHA insured loans. You may contact them toll free at (888)297-8685.
If you presently have a VA loan you should contact the VA Regional Loan Center at (800)827-1000. Or for more information go to:
www.homeloans.va.gov
FHA Loans With Special Circumstances:
1)Natural Disaster: If your home was damaged or your income reduced because of a hurricane, tornado, flood, wildfire, or other natural or man-made event, and your home or job is in an area that the President has declared a disaster area, your lender will not start foreclosure for 90 days. If you meet this criteria contact HUD’s National Serving Center at (888)297-8685 or for more information go to:
www.hud.gov/offices/hsg/sfh/nsc/qaho0121.cfm
2)Military Service: If you or your spouse is on active military duty, you may qualify for a reduction in your interest rate that will lower your monthly payments. To read about how the Servicemembers Civil Relief Act (formerly known as the Soldiers' and Sailors' Civil Relief Act of 1940) affects military homeowners go to:
www.hud.gov/offices/hsg/sfh/nsc/qasscra1.cfm
Circle The Wagons
What were talking about here is setting up a 'foreclosure safety net'. A safety net is a vital strategy to your financial survival and one that most people facing foreclosure do not think about.
The ‘safety net’ I’m referring to is the setting aside of as much cash as possible into a bank account as a reserve fund. This money may be key to allowing you to keep your home and pursue the best of your available options, including paying for legal representation.
What cash you ask?
When you are several mortgage payments behind your lender will most likely stop accepting your regular monthly payments unless you also include the total amount in arrears that you owe them. Most lenders will even return payments that are less than the total amount owed. If you are in this situation make sure to deposit this money into your reserve fund and leave it alone. Don’t spend it! I cannot emphasize enough how important this money will be for you later.
You can be certain that your credit card companies will not send any of your checks back to you. They will try to collect any amount of money from you that they can get. Don’t make the mistake of sending in your returned mortgage payment money to satisfy other bill collectors unless it fits into your plan of action. For example, if you decide to file for Chapter 13 Bankruptcy protection that money would be vital to helping you catch up on your mortgage while the rest of your debt is restructured.
Now to the common sense stuff. You must eliminate any unnecessary expenses (ones you can live without) such as cable TV, telephone, and dining out. Take any responsible action that will save or earn you cash. Then put all available cash into your reserve account and leave it there.
You should also strongly consider taking inventory of items you could sell quickly via a garage sale or on eBay to add to your reserve account. Nearly everyone can locate items in their possession that they have in their basement or garage that can bring in a few hundred or a few thousand dollars quickly. If you have two cars and can get by with one put the second car up for sale. Same if you have a boat or any other disposable asset. When you get back on your feet financially you can replace these items.
If you have an individual retirement account make sure you get professional counsel on the penalties and fees you may incur if you decide to liquidate it to free up more cash.
If you are unemployed - prioritize your debts.
Getting by will require a new, tightened budget. Prioritize your bills and pay those most necessary for your family’s survival:
The three most important elements for survival are food, utilities and shelter.
For further resources for those who are unemployed go to the U.S. Department of Labor’s website:
www.dol.gov
Foreclosure Home | Avoiding Foreclosure - Part 3
Is Your Forecosure Situation Critical?
The strategies shared on this website can help you successfully stop home foreclosure. But I want to make it clear that there is no magic bullet you can use to stop foreclosure cold. There is significant time and effort required on your part if you want to stop home foreclosure and keep your house.
I obviously cannot claim to know what your situation is. For all I know you are working three jobs right now in your attempts to keep afloat. Perhaps you simply don't have enough time to put into these steps. Or perhaps you are running out of time and need to resort to aggressive action to stop home foreclosure FAST.
If that is the case there is another option available if you have the means to spend a little money to save time. There is a program I highly recommend that can speed up the process of stopping foreclosure. A program aggressive enough to help you end your home foreclosure nightmare FAST. For real:
Foreclosure Home | Avoiding Foreclosure - Part 4
How To Refinance Out Of Foreclosure Without Borrowing More Trouble:
Foreclosure Refinance Obstacle #1 - Equity
If you have some equity [you owe less than its worth] in your house you may be able to refinance your loan and avoid foreclosure before it runs its course. In most cases you'll need at least 10% equity in your home to have a decent shot at refinancing out of your present loan and stopping foreclosure. The more equity you have the better your odds.
The key is not making the common mistake of taking out a new loan that is just as difficult for you to pay back as your present loan. If you do that you're only delaying the foreclosure process.
Foreclosure Refinance Obstacle #2 - Credit
If you're in foreclosure you can be certain that your credit rating has already been severely damaged. In addition to having lower credit scores you'll be further hampered by the foreclosure itself - which will appear as such on your credit report after about the third or fourth missed home payment in a row. If you are only one to three payments behind you will have a better chance of refinancing since the credit bureaus may not be flagging the account as foreclosure yet.
To learn how to increase your credit scores fast go here.
Every home loan program has very specific guidelines in regards to foreclosure. There is a recognized level of additional risk for any lender willing to lend to someone who has defaulted on a home loan before. If you're in foreclosure now you may not qualify for any type of refinance, 2nd mortgage loan, or credit line. In that case you will have to try another foreclosure strategy detailed on this site.
Even if you do qualify for a new loan you can count on the terms being ugly – high rate, high fees, and some exit restrictions (prepayment penalties). Your delinquent home loan puts you into the world of subprime loans since it is the only type of loan you’ll qualify for now. Subprime loans are for damaged credit and have significantly higher rates and costs due to the increased risk.
Many people that enter into subprime loans end up paying a lot of money only to delay their foreclosure. Don’t rush into anything you don't understand. Seek advice from an attorney or an accountant if you are unsure of the new loan terms or benefits. Look at the big picture instead of just the short term payment reduction.
If you are only a few months behind and haven't received a notice of default (NOD) from your lender your chances of refinancing are much better. But again, use caution because you will also be subject to subprime loan terms due to your damaged credit.
If you do decide to pursue a subprime loan there are some things you must watch out for:
Predatory Lending:
What is Predatory Lending? Predatory Lending is the practice of convincing homeowners to agree to unfair, abusive, and sometimes outrageous loan terms. In communities across America, many people are losing their homes and life’s savings to predatory lending tactics. In my opinion predatory lending has played a significant role in the foreclosure epidemic we are now experiencing.
Common Activities Involved In Predatory Lending:
- Encouraging borrowers to lie about their income, expenses, or assets in order to get a loan
- Using false appraisals – with values that are higher than what the market supports
- Knowingly lending more money than a borrower can afford to repay
- Charging high interest rates to borrowers based on their race or national origin and not on their credit history
- Pressuring borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties. Or not clearly explaining these restrictions and limitations in advance
- Targeting vulnerable borrowers to cash-out refinance offers when they know borrowers are in need of cash due to medical, unemployment or debt problems
- "Stripping" homeowners' equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower. A practice I call ‘serial refinancing’
- Charging fees for unnecessary or nonexistent products and services
- Using high pressure sales tactics to convince you to take the loan
- Increasing loan rates or fees after a Good Faith Estimate has been signed by the borrower. The worst abuse of this practice is when the borrower learns about the change in terms at closing when most people feel it is too late to back out of the loan and feel 'stuck'
What Tactics Do Predators Use?
- A lender or investor tells you that they are your only chance of getting a loan. Even though time is short, you should still have enough time to shop around and compare terms and costs. But keep in mind that with subprime loans you will have fewer options
- You are presented loan terms that change (to the lender’s benefit) as the loan process evolves
- You are asked to sign a sales contract or loan documents that are blank or that contain information which is not true
- You are told that the Federal Housing Administration insurance protects you against property defects or loan fraud - it does not
- The cost or loan terms at closing are not what you agreed to
- You are told that refinancing can solve your credit or money problems
- The loan officer does not show up personally to attend your closing and answer your questions
Also beware of refinance offers you receive in the mail telling you that you have been "pre-approved" for credit based on the equity in your home or other factors. When you are wondering how you are going to pay your mortgage and other bills, these offers may appear attractive but are usually a rip off. If you are considering a new loan think about this: If you cannot make your payments now, how is increasing your debt going to make things better? Don’t trade short-term payment gratification for long-term financial damage.
If you would like more information on predatory lending the government-chartered agency Freddie Mac has an excellent website set up to help you at:
www.dontborrowtrouble.com
Where to Report Suspected Predatory Lending
Homeowners can either visit the Mortgage Bankers Association’s Stop Mortgage Fraud website at:
www.stopmortgagefraud.com
or call (800) 348-3931 to get information on what steps to take to file a complaint. Homeowners who call will receive a brochure that contains information also found on the Web site.
