Foreclosure
What is Foreclosure?
It's when a homeowner is unable to make principal and/or interest payments on their mortgage. The lender, a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract.
What Happens When a Mortgage Payment is Missed?
Unfortunately, Foreclosure can happen. By missing a mortgage payment, your lender has the legal means to repossess your home and force you to move out. If your property is worth less than the total amount you owe on your loan, a Deficiency Judgment could be pursued. Both a Foreclosure and a Deficiency Judgment can affect your ability to qualify for credit in the future. So you should avoid foreclosure, if possible.
How Can a Foreclosure be Avoided?
First of all, if you are struggling to make your payments, call or write to your lender's Loss Mitigation Department right away. Explain your situation and be prepared to provide them with financial information like your monthly income and expenses. Just follow these 3 simple rules:
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Contact your lender as soon as you know your payment will be late. -
Never ignore the lender's letters or phone calls. -
Don't assume that your situation is hopeless.
What are Some Other Solutions for "Long-Term" Problems to Avoid Foreclosure?
Your lender will determine if you qualify for the following alternate solutions. Also, a housing counseling agency can help you with your options, plus interact with your lender on your behalf:
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The loan is at least 2 months delinquent -
The house is sold within 3-5 months -
A new appraisal, that the lender will obtain, indicates that the home value meets program guidelines.
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A Promissory Note must be signed allowing HUD to place a lien on your property for the amount received from the FHA Insurance Fund. -
The note is interest free, but must be repaid eventually. -
The note becomes due when you pay off the loan, transfer title, or sell the property.
What are Some Other Solutions for "Temporary" Problems to Avoid Foreclosure?
Reinstatement – This is possible when you are behind in payments, but can promise to pay a lump sum of money to bring your regular payments back by a specific date.
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Your loan is at least 4-months delinquent, but not more than 12-months. -
You are able to begin making full mortgage payments again.