Program & Services

How to Avoid Foreclosure

Q: What happens when I miss my mortgage payments?

Foreclosure may occur. This means your lender can take back your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your home loan, your lender could seek that money, too. If that happens, you not only lose your home, you also would owe your lender the money.

Foreclosure could seriously affect your ability to qualify for credit in the future, so you should avoid it if all possible!

Q: What should I do?

• If you are having problems making your payments, contact your lender immediately. Explain your situation. They may be willing to work with you.
• Stay in your home for now. You may not qualify for assistance if you leave your home.
• Contact a HUD-approved housing counseling agency. They have information on services and programs that could help you. They may also offer credit counseling. These services are usually free of charge.
• If you bought your home with a Veterans Administration (VA) loan, call the VA office nearest you.

Q: What are my alternatives?

Your options include the following:

Special situations

Your lender may be able to arrange a new payment plan. Your lender may even lower or stop your payments for a while. They may do this if you have recently lost your job or if you had an unexpected increase in bills.

Refinance

You may be able to refinance your home loan. This may help you catch up by reducing the monthly payments.

HUD loan

Your lender may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current. You may qualify if:

• Your loan is at least four months delinquent but no more than 12 months delinquent.
• Your mortgage is not in foreclosure.
• You are able to begin making full mortgage payments.

When your lender files with HUD, HUD will pay your lender the amount needed to make your home loan current. A lien will be placed on your property until HUD is paid back. The HUD loan is interest-free. It will be due if you sell or leave your property or if you pay off your home loan.

Sell before you lose your home

This will allow you pay off your mortgage loan to avoid having the home taken from you and damaging to your credit rating. Many times, you can sell the home for more than you paid for it.

Giving back your home

As a last resort, you may be able to "give back" your property to the lender. This won't save your house, but it will help your chances of getting another home loan in the future. You might be able to do this 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.
• You don't have another FHA mortgage in default.

Q: Should I be aware of anything else?

Yes, beware of scams!

Solutions that sound too good to be true usually are. If you're selling your home by yourself, beware of buyers who try to rush you. There are people who may try to take advantage of your financial difficulty. Be alert to the following:

Equity skimming

In this scam, a "buyer" promises to pay off your loan or give you a sum of money when the property is sold. The person suggests that you move out quickly and deed the property to him or her. The person then collects rent for a time and allows the lender to foreclose. Remember that signing over your deed to someone else does not relieve you of your loan.

Phony counseling services

Some groups calling themselves "counseling services" may offer to help you for a fee. These could include things you can do for yourself for free, such as getting a new payment plan with your lender. Don't pay for these services before you call your lender or HUD.

Q: What can I do to avoid being scammed?

• Don't sign any papers you don't fully understand.
• Make sure you get all "promises" in writing.
• Check with a lawyer or your home loan company before entering into any deal involving your home.
• If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the buyer. Contact your state's attorney general (in Maricopa County, contact the Arizona Attorney General's office), the state real estate commission (in Maricopa County, contact the Arizona Department of Real Estate), or your local consumer fraud unit.

Q: What are the main points I should remember?

• Don't lose your home and damage your credit history if you can help it.
• Call or write your mortgage lender immediately.
• Stay in your home to make sure you qualify for assistance.
• Arrange an appointment with a HUD-approved housing counselor to explore your options.
• Cooperate with the counselor or lender trying to help you.
• Explore every alternative to losing your home.
• Beware of scams.
• Do not sign anything you don't understand.
• Remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.
• Act now. Delaying won't help. If you do nothing, you will lose your home and your good credit rating.