Seven Easy Steps to Avoid Foreclosure

Don't spend your hard earned money paying some middleman shyster to work with your lender! You can be your own best representative and the steps you need to take are simple.

All these steps are based on experience and recommendations from the US Department of Housing and Urban Development.

1. DO NOT IGNORE THE LETTERS & PHONE CALLS FROM YOUR LENDER As painful and time consuming as it may be, answer their phone calls and respond to their letters. Most lenders, especially in this economy, have programs in place and are willing to work with you if you communicate with them. Be calm, be patient and open to discussing your situation.

2. BE PREPARED Collect your financial information and share it with your lender. They will want to know:

* Why you are having trouble making your payments

* When you will be able to bring your mortgage current

* Do you plant to keep your home or are you trying to sell it

* Is your shortfall situation short or long term

* What is your current income

* Details of your monthly expenses – utilities, insurance, entertainment, credit card payments, car payments, education…

* Do you have any other sources of income? Can family or friends help you through this tight situation?

Without this information they are much less likely to be able to help you.

3. ASK QUESTIONS The Federal Government and private lenders have programs in place to help homeowners in jeopardy keep their homes. You may qualify for one of these programs. Ask your lender and HUD approved counselor. Should you not qualify for any of today’s programs keep asking. New programs are constantly being developed.

4. STAY IN YOUR HOME FOR NOW Do not abandon your home! If you move out foreclosure proceedings will move more swiftly.

5. DO NOT LIST YOUR HOME FOR SALE If you reasonably expect to be able to afford your home DO NOT put it up for sale. A home for sale is very UNLIKELY to qualify for any special programs, receive forbearance assistance, loan modification or refinancing.

6. CONTACT A HUD-APPROVED HOUSING COUNSELING AGENCY This is far and away your BEST FREE resource for mortgage questions. You will find these agencies provide excellent information on services and programs offered by both government agencies and private organizations that could help you. The housing counseling agency may also offer credit counseling.

7. DON’T PAY SOMEONE TO WORK WITH YOUR LENDER Hiring a middleman is one sure way to spend money you don't have. Use the free counseling agencies available. They provide great insight and will help you determine your best course of action. They will help you interact with your lender and get the best option available to you. Skilled, knowledgeable and FREE!

Overall

Forbearance In forbearance, your lender will agree to a modified payment plan based on your financial situation. Often this includes a reduction or suspension of your monthly 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 your loan at a reduced principal or interest rate 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 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.

Sell Your Home If you are unable to qualify for any of the above options, have some equity in your home and are confident it can be sold quickly you should seriously consider selling the home. It may be better to cut your loses and find another housing solution rather than continue to fight a losing battle.

Pre-foreclosure sale / Short Sale 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:

* The loan is at least 2 months delinquent; * You are able to sell your house within 3 to 5 months; and * A new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines.

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.

DO I QUALIFY FOR ANY OF THESE OPTIONS? You will have to discuss your situation in detail with your lender to determine if you qualify. A housing counseling agency can also help you determine which, if any, of these options may meet your needs. Often they will assist you in interacting with your lender if needed.

SHOULD I BE AWARE OF ANYTHING ELSE? Yes. If you're selling your home 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 following:

Phony counseling agencies

Some groups calling themselves “counseling agencies” may approach you and offer to perform certain services for a fee. These are 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.

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.

Main points:

1. Act now - Don't avoid your lender's calls or letters. 2. Don't lose your home and damage your credit history. 3. Call or write your mortgage lender immediately and be honest about your financial situation. 4. Stay in your home to make sure you qualify for assistance. 5. Arrange an appointment with a HUD-approved housing counselor to explore your options. 6. Cooperate with the counselor or lender trying to help you. 7. Explore every alternative to keep your home. 8. Beware of scams. 9. 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.