If a misfortune occurs, such as a layoff or medical emergency, it may be hard to make your mortgage payments on time. Take action immediately to save your home from foreclosure and keep your good credit rating. A foreclosure remains on your credit report for 7 years.
The First Step
Tell your mortgage lender about your problem. Find the toll-free number to call out of town lender. Get the facts together and be ready to discuss your problem in detail.
Have a Plan
Before calling or visiting your lender, think about questions the lender may ask you. Make notes to help answer them. Be prepared and sincere. Here are possible questions you will need to answer:
What caused you to fall behind in your payments?
More Sources of Help
Explain the situation that led to your problem (layoff, medical expense, large utility bill, etc.). Tell the truth.
What are current resources?
Write down your current monthly income include all DEPENDABLE sources, such as:
- disability benefits
- public assistance
- VA benefits
- Social Security benefits
- savings accounts
- your spouse's or children's income
- insurance policies (or other assets) against which you may temporarily borrow
- other sources, such as alimony or child support
What are your other debts and expenses?
List your other expenses for essentials. It is better to give up a second car, boat or credit cards than to lose your home. Be realistic. This list should include:
- average monthly food cost
- average monthly utility bills
- monthly loan payments
- monthly credit card payments
- insurance premiums (home, auto, medical, etc.)
- alimony or child support
- unpaid past and future medical expenses
- all other current obligations
What are your plans?
Think of how you can manage this crisis and have a plan to solve the problem. What reduced payment could you afford or what time period will be necessary in order to catch up delinquent payments. Your attitude, outlook and plan will influence how far the lender will go to help you. Do not give up hope!
There may be ways to get financial assistance. If not, then it is still possible to reduce your losses and prevent foreclosure proceedings even if you need to sell your home. Foreclosure can ruin your credit rating for years.
Many communities also have agencies that can help:
Your Lender Can Help
- The County Extension Service Family and Consumer Sciences provides educational assistance in household financial and family crisis management.
- Local government or United Way agencies sponsor organizations that give credit counseling.
- Your credit union, labor union and religious and social service agencies may offer sources of help and counseling.
- If your mortgage is an FHA (HUD) or VA guaranteed loan, contact the appropriate local government office. See "HOUSING", Other Sites.
Here are some possibilities:
- A new affordable repayment plan might be worked out
- If your lender has ties with a local debt-counseling organization, you may be able to receive consultations. A debt counselor analyzes your budget and arrangsses repayment plans with your creditors.
- In some cases, the lender may temporarily reduce/suspend your regular monthly mortgage payments. Or, the past due amount could be reduced by increasing your payments over a longer time span.
- Under certain conditions, your lender may agree to re-work your mortgage-past due payments and added to the unpaid principal balance. Your interest rate will not increase, but the time it takes to pay off the loan may be longer
- Under certain conditions, if your home mortgage was insured by FHA, it might be assigned to the US Dept. of Housing and Urban Development (HUD). HUD would then become your lender and help you work out a repayment plan.
- If you cannot make regular monthly mortgage payments within a reasonable period, your lender may advise you to: protect your investment by selling your home, or reduce your loss by signing your property over to the lender. Consider these two options only as a last resort. Either one can help avoid foreclosure and protect your credit rating.