Avoiding Foreclosure on Your Home

Millions of homeowners are facing financial difficulties because of how they structured their mortgages. Some borrowers did not understand the risks of a mortgage tied to fluctuating interest rates. Others borrowed more than they could afford or did not anticipate a sufficient cash cushion to cover them when their adjustable rates rose.

Develop a Checklist

The Better Business Bureau (BBB) and the U.S. Department of Housing and Urban Development (HUD) offer the following checklist to improve your chances of keeping ownership of your home:

• Don’t ignore the problem. The further behind you become, the harder it will be to reinstate your loan.
• Open and respond to all mail from your lender. The first notice will offer good information about foreclosure prevention options.
• Contact your lender. If you have missed a mortgage payment, contact your lender about outlining refinance options. Speak to the lender’s Loss Mitigation or Collection Department to obtain information on options.
• Discuss your situation honestly. Give the lender specialist an accurate account of all bills and statements.
• Review the terms of your mortgage. Find out how much equity you have in your home. Review the “reset” points and see if there are penalties or restrictions should you qualify to refinance.
• Know your mortgage rights. Learn about the foreclosure laws and time frames in your state by contacting the State Government Housing Office.
• Understand foreclosure prevention options. HUD’s housing counseling program helps families obtain, sustain, and retain their homes.
• Prioritize your spending. Review your finances and see where you can cut spending. Look for optional expenses that you can eliminate, such as cable television and streaming services, memberships, and entertainment. Delay payments on credit cards until you have paid your mortgage.
• Consider your options. Your lender may approve a retention, which grants a temporary reprieve from the full monthly payment to help resolve financial issues. Payments normally resume later. If the property is worth less than the balance owed on the mortgage, liquidation can allow the homeowner to settle with the lender.
• Use your assets. Sell that second car or jewelry. Check whole life insurance policies for a cash valve. 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.

Be Aware of Foreclosure “Rescue” Scams

Be aware of con artists who scam homeowners into moving out and deeding their property over to a third party under the guise that they can rent the property with the option to buy it back later. In many cases, the original homeowner may not be able to afford the rent and can face eviction, or the price to buy the property back is too high.

Seek Assistance from a Housing Counselor

If you take the above steps and are not able to reach a satisfactory conclusion, don’t give up. The HUD 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. To find a HUD-approved housing counselor near you, call (800) 569-4287 or TTY (800) 877-8339. ■