Ten Tips to Help You
A timely piece of advice from HUD to help you avoid foreclosure.
In many parts of the country, foreclosures are at an all-time high, following surges in the housing market and an epidemic of sub-prime loans allowing families who previously could not qualify for mortgages to do so. The result is that many families in recent years have bought homes that really were out of their reach, made possible only because the low interest rate kept the payments within the realm of the do-able. Unfortunately, as the adjustable-rate mortgages begin to adjust upwards, the families can no longer afford the payments, and they begin sliding down the slippery slope towards foreclosure.
The U.S. Department of Housing and Urban Development (HUD) has just released its top 10 tips to help homeowners who may be facing foreclosure.
"These guidelines will assist homeowners who are struggling to pay their mortgage and could be threatened with foreclosure," said HUD Secretary Alphonso Jackson. "We want to encourage homeowners to take action and use every resource available so that they can get control of their finances and stay in their home."
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. It costs them money if they have to foreclose and take your home. They have options to help borrowers through difficult financial times, and usually would prefer to work out a plan that works for both of you rather than foreclosing and leaving you homeless.
But don't confuse this with an altruistic motive. Lenders are in the business of lending money. They want a return on their investment, and they want to know their investment is secure. They really don't care that Great-Aunt Sally is in the hospital, and you're helping out because she doesn't have any other family. Just remember their focus is on protecting their investment, and keep your discussion on a business-like level.
Focus on the temporary nature of the problem (if it is), and when you think you might be able to resume regular payments. If the set-back is just temporary, and there's a good possibility that within a few months, you'll be able to make regular payments, they are more likely to try to work out a solution with you.
3. Open and respond to all mail from your lender.
The first notices you receive will likely offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notices 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, or by making an appointment with your local military Legal Assistance Attorney.
5. Understand your options to prevent foreclosure.
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. Or contact your local military Legal Assistance office.
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, Starbucks, movies or movie rentals - that you can cut back on or eliminate altogether.
Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage. If you cannot pay all your bills each month, be sure to pay your mortgage first. Then, if you have to, rotate the credit card bills you pay. For example, pay the minimum on the VISA bill and nothing on the MasterCard bill this month. Then next month, pay nothing on the VISA bill, and make the minimum payment on the MasterCard. The missed payments will be reported as "late pays" on your credit report, but won't be nearly as damaging as a foreclosure.
8. Use the assets you have.
Do you have assets - a second car, jewelry, a big-screen TV, computer, stereo or camera equipment, etc. - 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, and that you are at least TRYING to make your payments.
9. Avoid companies that promise to help you prevent foreclosure.
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 person or firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, STOP! 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.
As a member of the military, you have an advantage over your civilian counterpart. You have access to free legal advice at your local on-base Legal Assistance office. Call and make an appointment, then take all relevant legal documents with you, including your mortgage, any correspondence you've received from the lender, and any papers that someone is asking you to sign, promising they can help you.
To find out more about HUD-approved housing counseling agencies and their services, please visit www.hud.gov or 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.
Or call the National Foreclosure Hotline, which offers assistance to homeowners facing foreclosure.
HUD is the nation's housing agency committed to increasing home ownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development, and enforces the nation's fair housing laws. More information about HUD and its programs is available at www.hud.gov.
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