How to Avoid Foreclosure

Adapted from US Department of Housing and Urban Development: http://www.hud.gov/foreclosure/

 

Some of the guidance below is applicable to homeowners with FHA Insured loans. While much of the information may apply to all homeowners in danger of losing their homes, not all of the foreclosure avoidance tools mentioned may be available to you if you have a VA or conventional loan. Additionally, HUD/FHA does not have any Loss Mitigation oversight over VA or conventional loans. Please contact your lender or a housing counseling agency.

 

Q: What Happens When I Miss My Mortgage Payments?

Foreclosure may occur. This is the legal means that your lender 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, a deficiency judgment could be pursued. If that happens, you not only lose your home, you also would owe HUD an additional amount.

Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. Therefore, you should avoid foreclosure by any means possible.

 

Q: What Should I Do if I can’t make my mortgage payments?

DO NOT IGNORE THE LETTERS FROM YOUR LENDER. 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.

Stay in your home for now. You may not qualify for assistance if you abandon your property.

For FHA loans, contact a HUD-approved housing counseling agency. Call (800) 569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. 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.

 

Q: What Are My Alternatives to Foreclosure?

Special Forbearance.

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.

 

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 and can afford the new payment amount.

 

Partial Claim (FHA).

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:

· Your loan is at least 4 months delinquent but no more than 12 months delinquent;

· 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.

 

Pre-foreclosure sale or re-instatement.

Starck Investments, LLC can help in this area.  Many individuals who are in foreclosure try to sell their home through a realtor.  Although this is an alternative, many times the owner will still lose the home through foreclosure, since it takes an average of four months to sell a house.

Starck Investments, LLC will work with you to understand your current situation, and then suggest possible alternatives that may include an offer to buy your home if you do not qualify for any of the alternatives above.

Foreclosure is a drastically unfair method used by lenders and mortgage companies to collect on their outstanding loans.  If you do nothing, your property will be taken away from you and sold at a public auction to the highest bidder, and the new owner will evict you!  The proceeds from auction will be used to pay off the mortgage that is in default; this also includes foreclosure costs, attorney fees, and other court costs.  The only thing you receive from this procedure is a black mark on your credit history, possibly stopping you from ever owning a home again!

If your house is sold this way, you will get absolutely nothing from the sale.  The institution holding your mortgage only cares about getting back the money that you owe them. They do not care about you, your current situation, or your future.

It is in your own best interest to resolve the issue with your lender and not let it go to foreclosure.

 

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:

· 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 FHA mortgage in default.

 

Q: How Do I Know if I Qualify for Any of These Alternatives?

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 lender.  Call (800) 569-4287 or TDD (800) 877-8339.

 

Q: 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. Starck Investments, LLC encourages you to obtain legal advice on all financial transactions. 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 lender to foreclose. Remember, 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 lender, or pursuing a pre-foreclosure sale. If you have any doubt about paying for such services, call a HUD-approved housing counseling agency at (800) 569-4287 or TDD (800) 877-8339. Do this before you pay anyone or sign anything.

Starck Investments, LLC counseling services are FREE, and there is no obligation.  We understand that this is a stressful time and would like to help in any way we can.

 

Q: Are There Any Precautions I Can Take?

Here are several important precautions that should help you avoid being "taken" by a scam artist:

· Do not sign any papers you do not fully understand.  If you do not understand what you are signing, please seek legal counsel.

· Make sure you get all "promises" in writing.

· Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt.

· Check with a lawyer or your mortgage company before entering into any deal involving your home.

· If you are 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.

 

Q: What Are the Main Points I Should Remember?

· Do not lose your home to foreclosure and damage your credit history.  Explore every alternative to keep your home.

· Call or write your mortgage lender immediately and be honest about your financial situation.

· Stay in your home to make sure you qualify for assistance.

· Arrange an appointment with a HUD-approved housing counselor to explore your options at (800) 569-4287 or TDD (800) 877-8339.

· Cooperate with the counselor or lender trying to help you.

· Beware of scams, and fraudulent offers.

· Do not sign anything you do not understand.  In addition, remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.

 

· Act now. Delaying cannot help. If you do nothing, YOU WILL LOSE YOUR HOME and your good credit rating.

Starck Properties & Consulting

Starck Investments, LLC

http://www.starck.us/