1. DO NOT IGNORE THE LETTERS FROM
If you are having problems making your payments, call or
write to your lender's Loss Mitigation Department
without delay. 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.
2. STAY IN YOUR HOME FOR NOW
You may not qualify for assistance if you abandon your
3. CONTACT A HUD-APPROVED HOUSING COUNSELING AGENCY
These agencies are valuable resources. They frequently
have information on services and programs offered by
Government agencies as well as private and community
organizations that could help you. The housing
counseling agency may also offer credit counseling.
These services are usually free of charge.
WHAT ARE MY ALTERNATIVES?
You may be considered for the following:
Your lender may be able to arrange a repayment plan
based on your financial situation and may even provide
for a temporary reduction or suspension of your
payments. You may qualify for this if you have recently
experienced a reduction in income or an increase in
living expenses. You must furnish information to your
lender to show that you would be able to meet the
requirements of the new payment plan.
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 and can afford the new payment amount.
Your lender may be able to work with you to obtain a
one-time payment from the FHA-Insurance fund to bring
your mortgage current.
You may qualify if:
1. Your loan is at least 4 months delinquent but no more
than 12 months delinquent;
2. You are able to begin making full mortgage payments.
When your lender files a Partial Claim, the U.S.
Department of Housing and Urban Development will pay
your lender 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 is due when you pay off the first
mortgage or when you sell the property.
This will allow you to avoid foreclosure by selling your
property for an amount less than the amount necessary to
pay off your mortgage loan.
You may qualify if:
1. The loan is at least 2 months delinquent;
2. You are able to sell your house within 3 to 5 months;
3. A new appraisal (that your lender will obtain) shows
that the value of your home meets HUD program
Deed-in-lieu of Foreclosure
As a last resort, you may be able to voluntarily “give
back” your property to the lender.
This won't save your house, but it is not as damaging to
your credit rating as a foreclosure.
You can qualify if:
1. You are in default and don't qualify for any of the
2. Your attempts at selling the house before foreclosure
were unsuccessful; and
3. You don't have another FHA mortgage in default.
HOW DO I KNOW IF I QUALIFY FOR ANY OF THESE
Your lender will determine if you qualify for any of the
alternatives. A housing counseling agency can also help
you determine which, if any, of these options may meet
your needs and also assist you in interacting with your
SHOULD I BE AWARE OF ANYTHING ELSE?
Yes. 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
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 lender to foreclose.
Remember, signing over your deed to someone else does
not necessarily relieve you of your obligation on your
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 lender, or pursuing a pre-foreclosure
sale. If you have any doubt about paying for such
services, call a HUD-approved housing counseling agency.
Do this before you pay anyone or sign anything.
ARE THERE ANY PRECAUTIONS I CAN TAKE?
Here are several precautions that should help you avoid
being “taken” by a scam artist:
1. Don't sign any papers you don’t fully understand.
2. Make sure you get all “promises” in writing.
3. Beware of any contract of sale or loan assumption
where you are not formally released from liability for
your mortgage debt.
4. Check with a lawyer or your mortgage company before
entering into any deal involving your home.
5. 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
General, the State Real Estate Commission, or the local
District Attorney’s Consumer Fraud Unit for this type of
WHAT ARE THE MAIN POINTS I SHOULD 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
4. Arrange an appointment with a HUD-approved housing
counselor to explore your options.
5. Cooperate with the counselor or lender trying to help
6. Explore every alternative to keep your home.
7. Beware of scams.
8. Do not 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.
Delaying can't help. If you do nothing, YOU
WILL LOSE YOUR HOME and your good credit rating.
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