If you are having difficulty making your mortgage payment, one of the most important things you can do is seek assistance right away, if possible before you even miss a payment. Lenders do not want to take your house. They prefer to receive payment rather than take possession of a home for which they must find a buyer. Government agencies and non-profit organizations stand ready to help.
Here are a few things you can do to prevent foreclosure:
- Contact your lender as soon as you know you can't make a payment.
- Read and answer all letters from your mortgage company.
- Contact a reputable organization or HUD-approved counselor to assist you.
- Gather your mortgage documents and review the terms.
- Be proactive and contact your lender or other reputable organization.
- Know the scam warning signs to protect you and your home from falling victim to scam artists who offer various "foreclosure rescue" programs.
- Act quickly. Time if an important factor in resolving payment difficulties.
- Don't listen to anyone who tells you not to contact your lender or seek help.
- Think about a "plan B" if you can't keep your home.
Qualified organizations can help you talk to your lender. A Housing and Urban Development certified housing counselor can assist you with contacting your lender or responding to letters from your mortgage company.
A certified housing counselor can help you:
- understand whether your financial situation is short- or long-term.
- explore your options with your current lender.
- determine if you qualify for a "work out" program.
- identify federal foreclosure prevention programs, including new loans.
North Carolina Foreclosure Help can connect you with a HUD counselor and other resources in your area. The hotline is open 24 hours a day, seven days a week. Call 888-995-HOPE (4673) or visit http://www.995hope.org/.
There are several programs to help you if you are at risk of default or foreclosure. Options include loan modification and refinancing for more affordable, sustainable loans. Mortgage modification is when your lender changes one or more terms of the loan to make it more affordable. Your loan could be permanently changed in one or more of the following ways:
- adding the missed payments to the existing loan balance.
- changing the interest rate, including making an adjustable rate into a fixed rate.
- extending the number of years you have to repay the mortgage.
FHA Partial Claim offers a one-time interest-free loan if your mortgage is insured. You qualify for an FHA partial claim if:
- your loan is between 4 and 12 months delinquent.
- you are able to begin making full mortgage payments again.
The partial claim offer promissory note is interest-free and is due when you pay off the first mortgage or when you sell the property.
Hope for Homeowners (H4H) offers refinancing into a new, more affordable loan. With this program, you will have a new mortgage either with your current lender or a new lender.
- It is a new federal program designed to keep borrowers in their homes.
- It refinances your existing mortgage into a new 30-year or 40-year fixed interest mortgage.
- You can contact your existing lender or new lender to find out how or if you qualify for this program.
Help from the Internal Revenue Service
The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude income from:
- the discharge of debt – when the lender reduces the loan amount owed on the home you live in.
- mortgage restructuring – when your current lender agrees to a change in your loan agreement that can include a lower interest rate, longer repayment term or a reduction in the principal balance. A loan modification is not a new loan. It is simply the restructuring of your current loan.
- mortgage debt forgiven in connection with a foreclosure.
Before the act, the IRS treated forgiven debt as taxable income. Now, up to $2 million ($1 million if married filing separately) of forgiven debt can be excluded from income and income taxation.
Remember, the bank does not want to take ownership of your home. Your lender would prefer to find a way to keep you in your home and receive mortgage payments. It may be possible for you to avoid foreclosure of your home. The most important thing is to address the situation as soon as you have a problem, investigate the various options available regarding mortgage modifications and refinancing and seek help from reputable, qualified advisors such as HUD counselors.
Other Useful Resources
This is a federal government program.
- Use interactive self-assessment tools that will enable you to determine if you're eligible to participate.
- Calculate the monthly mortgage payment reductions you may be able to realize.
- Get a handy checklist to ensure you collect all the documents they need before calling your mortgage company.
Publication date: March 1, 2010
There is an alternate Spanish language version of this document here: Consejos para prevenir el remate hipotecario de su hogar
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