|
How
to Avoid Foreclosure
When
you miss your mortgage payments, foreclosure may occur. This is
the legal means that your mortgage company can use to 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,
your mortgage company or
HUD could seek a
deficiency judgment. If that happens, you not only lose
your home, you also would owe your mortgage company or HUD an
additional debt. Foreclosure or a deficiency judgment could
seriously affect your ability to qualify for credit in the future.
So you should avoid it if all possible!
DO
NOT IGNORE THE LETTERS FROM YOUR MORTGAGE COMPANY. If you are
having problems making your payments, contact your mortgage
company immediately. Explain your situation. Be prepared to
provide them with financial information, such as your 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.
Some
of your options include the following:
- Special
Forbearance.
Your mortgage company may be able to arrange a repayment plan
based on your financial situation. Your mortgage company may
even provide for a temporary reduction or suspension of your
payments. You may qualify for this if you have recently lost
your job or your source of income or if you had an unexpected
increase in living expenses. You must furnish information to
your mortgage company to show that you would be able to meet
the requirements of the new payment plan.
- Mortgage
Modification. You may be able to refinance the debt and/or
extend the term of your mortgage loan. This may help you catch
up by reducing the monthly payments to a more affordable
level. You may qualify if you have recovered from a financial
problem but your net income is less than it was before the
default (failure to pay).
- Partial
Claim. Your mortgage company may be able to work with you
to obtain an interest-free loan from HUD to bring your
mortgage current. You may qualify if:
- your
loan is at least 4 months delinquent but no more than 12
months delinquent;
- your
mortgage is not in foreclosure; and
- you
are able to begin making full mortgage payments.
When
your mortgage company files a Partial Claim, HUD will pay your
mortgage company the amount necessary to bring your mortgage
current. You must execute 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 will be due
if you sell or leave your property, or when your mortgage
matures.
- Pre-foreclosure
sale. This will allow you to sell your property and pay
off your mortgage loan to avoid foreclosure and damage to your
credit rating. You may qualify if:
- the
"as is" appraised value is at least 70% of the
amount you owe and the sales price is 95% of the appraised
value;
- the
loan is at least 2 months delinquent prior to the
pre-foreclosure sale closing date; and
- you
are able to sell your house within 3 to 5 months
(depending on what your mortgage company agrees to).
An
additional benefit to this option is the assistance you will
receive with the Seller-paid closing costs.
- Deed-in-lieu
of foreclosure. As a last resort, you may be able to
voluntarily "give back" your property to the
mortgage company. This won't save your house, but it will help
your chances of getting another mortgage loan in the future.
You can qualify if:
- you
are in default and don't qualify for any of the other
options;
- your
attempts at selling the house before foreclosure were
unsuccessful; and
- you
don't have another mortgage in default.
A
housing counseling agency can help you determine which, if
any, of these options may meet your needs. You should also
discuss the situation with your mortgage company.
One
last thing, beware of scams! Solutions that sound too
simple or too good to be true usually are. If you're selling
your home without professional guidance, beware of buyers who
try to rush you through the process. Unfortunately, there are
people who may try to take advantage of your financial
difficulty. Be especially alert to the following:
- Equity
skimming. In this type of scam, a "buyer"
approaches you, offering to get you out of financial
trouble by promising to pay off your mortgage or give you
a sum of money when the property is sold. The
"buyer" may suggest that you move out quickly
and deed the property to him or her.
The
"buyer" then collects rent for a time, does not make
any mortgage payments, and allows the mortgage company to
foreclose. Remember that signing over your deed to someone
else does not necessarily relieve you of your obligation on
your loan.
- Phony
counseling agencies. Some groups calling themselves
"counseling agencies" may approach you and offer to
perform certain services for a fee. These could well be
services you could do for yourself, for free, such as
negotiating a new payment plan with your mortgage company, or
pursuing a pre-foreclosure sale. If you have any doubt about
paying for such services call HUD-approved housing counseling
agency. Do this before you pay anyone or sign anything.
Here
are several precautions that should help you avoid being
"taken" by scam artist:
- Don't
sign any papers you don't fully understand.
- Make
sure you get all "promises" in writing.
- Beware
of any loan assumption where you are not formally released
from liability for your mortgage debt and contracts of sale.
- 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.
INVESTORS:
How To
Buy Foreclosures HERE
FAQs
About How To Buy Foreclosed HUD Homes HERE
|
|
The Million Dollar Foreclosure
System |
|
|
|
|
