AVOIDING FORECLOSURE

Always make your mortgage payments on time. If you can’t, call your loan servicer immediately. (Your loan servicer is the company to whom you currently send your loan payment, not the company/lender who first opened your mortgage.) Even the most reliable borrowers sometimes fail to meet every payment on its due date. An unexpected crisis (long illness, job loss etc.) can negatively impact your ability to pay. Don’t be intimidated or embarrassed to call your loan servicer. They want to help you avoid foreclosure and can only do so if you contact them.

Note: Avoid companies that charge you a high fee upfront and claim they can help you avoid foreclosure. These could be scams!

Steps to avoid foreclosure

Here are some immediate steps you can take to help save your home and avoid foreclosure. Consult your tax advisor before you make any decisions. There could be tax costs or benefits that come with any of these ideas.

If you fall behind in making your mortgage payments, don’t hide from the situation. Contact your loan servicer immediately. The sooner you do, the more options may be available to you.

Typically, if you work directly with your loan servicer, they develop a plan to help you avoid foreclosure. A loan servicer is motivated to help you stay in your home. Foreclosure can be a complex process in which loan servicers must strictly follow state and local laws, go through legal channels, take possession, often make repairs, market the home, and successfully sell it. Because of the extensive costs and effort involved, loan servicers usually consider foreclosure a “last resort.”

The U.S. Department of Housing and Urban Development (HUD) provides a list of approved housing counselors on their website. A HUD-approved housing counseling agency can help you figure out your financial situation and recommend where you can cut costs, which can help you to pay the past due amount, if possible. You may be able to find a local housing counseling agency that can help you negotiate with your loan servicer.

The Homeownership Preservation Foundation has a National Assistance Hotline (1-888-995-HOPE) that provides advice, assistance and support to help individuals and families who are struggling financially to stay in their homes. For additional information, visit hopenow.com.

If you cannot pay the entire amount you owe on your loan, discuss a loan workout arrangement or mortgage modification with your loan servicer to avoid foreclosure. This means restructuring the loan in a way that enables you to repay. There may be several different options.

Talk to your loan servicer about the possibility of establishing a new repayment schedule for your mortgage. This is known as a loan modification, or restructuring the loan.

Loan modification is a change in one or more of the mortgage loan terms in order to make the monthly payment more affordable given the borrower’s present financial situation. These changes could include changing the loan’s interest rate, monthly payment amount, or time available to repay.

If your financial circumstances dramatically change, you may not be able to find a way to pay your loan — even after working with your loan servicer and a housing counselor. You may find that the best option is not to keep your home.

In this case, one option may be a short sale, or pre-foreclosure sale. A loan servicer will typically want the home’s sale price to repay what you owe on the mortgage, but may be willing to accept an amount less than what is owed. Discussing the short sale option with your loan servicer as early as possible is helpful. Don’t sell your home for less than what you owe without talking to your loan servicer first.

Another option may be a deed-in-lieu of foreclosure. This is when you make an agreement with your loan servicer to give your property back to the loan servicer.

Bankruptcy can be a solution for consumers who are struggling financially or need to create a repayment plan. Information about bankruptcy is available from the U.S Courts. at www.uscourts.gov/court-programs/bankruptcy.

The information contained herein is being provided as-is and without representation or warranty. The enclosed information is not intended as legal, tax or financial planning advice. Any discussion of tax or accounting matters herein (including any attachments) should not and may not be relied on by any recipient or reader. The recipient/reader should consult their tax adviser, legal consultant and/or accountant for a statement of tax and accounting rules applicable to their particular situation and for all other tax and accounting advice.