Eugene Loan Guy

Becoming a home owner is a great accomplishment but retaining the home is just as important. There are several things that the home owner can do to avoid foreclosure.  Most everyone encounters financial difficulties at one time or another, it is how you handle those difficulties that could lead to foreclosure or help you survive and keep your home. With the negative press about the rise in foreclosures, I thought it was time to talk about how to avoid the stigma of foreclosure. I will be giving you some information about ways to legally, and ethically, retain ownership in your home.

Foreclosure is a legal means for your lender to take your house if you are in default. Foreclosure can be initiated by anyone with a lien on the property, including the county if you don’t pay your taxes. Foreclosure not only means that you lose your home, but it can significantly damage your credit for years to come.

There are things you should have already done if you are falling behind, but if you haven’t, start now. Review your loan documentation. See what your rights and responsibilities are. Is there a pre-payment penalty on your loan? Can you make any type of partial payments? How is your payment credited? Has your loan been transferred to a different servicer than the one that made the loan? Were you properly notified and were your payments posted correctly?

In the case of payments not being credited properly, contact the National Servicing Center. This is operated by the Department of Housing and Urban Development (HUD). You can reach them at 888-297-8685 or on the net at www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm. Foreclosure prevention counseling is also available through HUD at 800-SAFENET or 800-723-3638 or on the net specific to Oregon at www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=OR.  For other states, just change the last two letters to your state’s abbreviation. Local help can be received through NEDCO. Please check out my blog about NEDCO on Active Rain.

Here are some ways to avoid foreclosure, some good, some not so good.

·         Forbearance – Ask your lender to reduce or suspend your monthly payments. Often times it will be added to the end of the loan. Most often this will cause late payments to be posted to your credit report.

·         Mortgage Modification – This is currently a very popular way of handling a temporary problem. Most lenders will not entertain a modification unless the borrower is delinquent.  You can do this yourself or ask a company to handle the process for you. If you are having difficulty getting the lender to work with you, give me a call, I can refer you to a reputable modification company.

·         Partial Claim – If you have an FHA loan, your lender can ask for a partial mortgage insurance claim to bring you current. There are several requirements for this to work, not the least being that the underlying problem has been resolved. This amount will also need to be repaid.

·         Pre-foreclosure sale – This allows you to sell the home prior to the bank taking it back. An additional option in this is a short sale which allows for the home to sell for less than is owed on it due to market conditions.

·         Short Sale refinance – handled just like a short sale but is an actual refinance of the property after the bank agrees to release the lien for less than is owed on it. Since the FHA Secure is no longer in existence, this will probably only work with a loan that is current.

·         Hope for Homeowners – This FHA program has not been a rousing success. Currently, the only operational use of this program that I know of is for those loans serviced by Wells Fargo and the new loan made by Wells Fargo. I am sure there are other lenders available; you will need to ask your servicing company.

·         Deed-in-lieu of foreclosure – With this option you “give back” your home to the bank and avoid foreclosure. It still counts the same as a foreclosure on your credit.

·         VA Interest Rate Reduction Refinance Loan (IRRRL) – This can be done on a delinquent VA loan under certain circumstances. The main condition for this to work is that the reason for the delinquency must no longer exist.

·         VA Refinance – VA refinance of existing conventional (sub-prime) loans to help a veteran that may be having difficulty. Must be a veteran and qualify for the new loan.

Delinquency on your mortgage is a serious business. There are counselors available through several sources to help you if you are in trouble. Don’t lose your home because you were unwilling to ask for help.  There are numerous agencies that are available to help home owners with their finances. If you can’t find someone locally, call the number for HUD. There are times that even tough people need help. There are positive ways to make it through tough times.

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