Foreclosures

Foreclosure Overview

Foreclosure is the process where a lender seeks possession of the security (home) when a loan has not been paid. While the process is similar in some states, each state does have their own process, timeline and procedures. The foreclosure process typically starts with a lender recording a Notice of Default or a Lis Pendens providing official public notice the process has begun. This stage is usually considered the pre-foreclosure stage where the property owner still has full rights to refinance or convey the property. The next step is the public auction held in a public place in the county where the property is located, or in some cases the auction is held in front of the property being auctioned. Auctions are frequently postponed, but after a successful auction, the property will have a new owner, either the lender auctioning the property, or a third party bidder.

After the auction, if the lender was the high bidder, the property is lender owned, or REO. Real Estate Owned property is then usually repaired to bring it to market standards and listed for sale with a real estate agent.

 

Foreclosure Avoidance Counseling

HUD-approved housing counseling agencies are available to provide you with the information and assistance you need to avoid foreclosure. As part of President Obama's comprehensive Homeowner Affordability and Stability Plan (HASP), you may be eligible for a special Making Home Affordable loan modification or refinance, to reduce your monthly payments and help you keep your home.


If you need help understanding the Making Home Affordable programs, you can use this search tool to find a counseling agency in your area that will provide you with free foreclosure prevention services. If you are eligible for the loan modification or refinance program, the counselor will work with you to compile an intake package for your servicer.

Foreclosure prevention counseling services are provided free of charge by nonprofit housing counseling agencies working in partnership with the Federal Government. These agencies are funded, in part, by HUD and NeighborWorks® America. There is no need to pay a private company for these services.

 

Contact Your Lender to Avoid Foreclosure

Many people avoid calling their lender when they have money troubles. Most of us are embarrassed to discuss our money problems with others or believe that if lenders know we are in trouble, they will rush to collection or foreclosure.

Foreclosure is expensive for lenders, mortgage insurers and investors. HUD/FHA, as well as private mortgage insurance companies and investors like Freddie Mac and Fannie Mae, require lenders to work aggressively with borrowers who are facing money problems.

Lenders have workout options to help you keep your home. However, these options work best when your loan is only one or two payments behind. The farther behind you are on your payments, the fewer options are available.

Do not assume that your mortgage problem will quickly correct itself. Don't lose valuable time by being overly optimistic. Contact your mortgage lender to discuss your circumstances as soon as you realize that you are unable to make your payments. While there is no guarantee that any particular relief will be given, most lenders are willing to explore every possible option.

Finding Your Lender

Check the following sources for lender contact information:

  • Your monthly mortgage billing statement
  • Your payment coupon book
  • Search the web
  • Directory assistance or phone book

Information To Have Ready When You Call:

To help you, lenders typically need:

  • Your loan account number
  • A brief explanation of your circumstances
  • Recent income documents such as pay stubs, Social Security benefits statements, disability, unemployment, retirement, or public assistance. If you are self-employed, have your tax returns or a year-to-date profit and loss statement from your business available for reference)
  • List of household expenses

Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a "loan workout" package. This package contains information, forms and instructions. If you want to be considered for assistance, you must complete the forms and return them to your lender quickly. The completed package will be reviewed before the lender talks about a solution with you.

Do Not Ignore Mail or Phone Calls From Your Lender

Your lender will try to contact you by mail and phone soon after you stop making payments. It is very important that you respond to the mail and the phone calls offering help. If your lender does not hear from you they will be required to start legal action leading to foreclosure. This will substantially increase the cost of bringing your loan current. Do not ignore contact from your lender.

If You Have an FHA Insured Loan

HUD's National Servicing Center works closely with customers who have FHA insured loans. Check your mortgage document or ask your lender if your loan is FHA insured. Do you feel your lender is not responding to your questions? Do you want assistance contacting your lender? HUD's National Servicing Center is ready to help you.

 

Are you at risk of foreclosure and losing your home?
Foreclosure doesn't happen overnight

 

Have you missed your house payment?

 

Haven't missed a house payment yet, but afraid you might?

Has your financial situation changed due to a mortgage payment increase, loss of job, divorce, medical expenses, increase in taxes or other reasons?

  • Is your credit card debt becoming unmanageable?
  • Are you using your credit cards to buy groceries?
  • Is it becoming difficult to pay all your monthly bills on time?

 

If it’s becoming harder to make your house payment each month:

Few people think they will lose their home; they think they have more time.

Here's how it happens. Note: Timeline varies by state.

  • First month missed payment - your lender will contact you by letter or phone. A housing counselor can help.
  • Second month missed payment - your lender is likely to begin calling you to discuss why you have not made your payments. It is important that you take their phone calls. Talk to your lender and explain your situation and what you are trying to do to resolve it. At this time, you still may be able to make one payment to prevent yourself from falling three months behind. A housing counselor can help.
  • Third month missed payment - after the third payment is missed, you will receive a letter from your lender stating the amount you are delinquent, and that you have 30 days to bring your mortgage current. This is called a "Demand Letter" or "Notice to Accelerate." If you do not pay the specified amount or make some type of arrangements by the given date, the lender may begin foreclosure proceedings. They are unlikely to accept less than the total due without arrangements being made if you receive this letter. You still have time to work something out with your lender. A housing counselor can still help.
  • Fourth month missed payment - now you are nearing the end of time allowed in your Demand or Notice to Accelerate Letter. When the 30 days ends, if you have not paid the full amount or worked our arrangements you will be referred to your lender's attorneys. You will incur all attorney fees as part of your delinquency. A housing counselor can still help you.
  • Sheriff's or Public Trustee's Sale - the attorney will schedule a Sale. This is the actual day of foreclosure. You may be notified of the date by mail, a notice is taped to your door, and the sale may be advertised in a local paper. The time between the Demand or Notice to Accelerate Letter and the actual Sale varies by state. In some states it can be as quick as 2-3 months. This is not the move-out date, but the end is near. You have until the date of sale to make arrangements with your lender, or pay the total amount owed, including attorney fees.
  • Redemption Period - after the sale date, you may enter a redemption period. You will be notified of your time frame on the same notice that your state uses for your Sheriff's or Public Trustee's Sale.

Important: Stay in contact with your lender, and get assistance as early as possible. All dates are estimated and vary according to your state and your mortgage company.

 

Tips for Avoiding Foreclosure

 

Are you having trouble keeping up with your mortgage payments? Have you received a notice from your lender asking you to contact them?

 

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. They have options to help borrowers through difficult financial times.

3. Open and respond to all mail from your lender.

The first notices you receive will 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.

5. Understand foreclosure prevention options.

Valuable information about foreclosure prevention (also called loss mitigation) options can be found online.

6. Contact a HUD-approved housing counselor.

The U.S. Department of Housing and Urban Development (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. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.

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--that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.

8. Use your assets.

Do you have assets--a second car, jewelry, a whole life insurance policy--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.

9. Avoid foreclosure prevention companies.

You don't need to pay fees for foreclosure prevention help--use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate 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 free if you contact them.

10. Don't lose your house to foreclosure recovery scams!

If any firm claims they can stop your foreclosure immediately and if you sign a document appointing them to act on your behalf, 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 trusted real estate professional or a HUD-approved housing counselor.