Homeowners at risk of foreclosure should consider speaking to a housing counselor a top priority.
The National Foreclosure Mitigation Counseling Program, which includes more than 1,700 nonprofit counseling agencies and local organizations across the country, has counseled over a million homeowners facing foreclosure.
Also, Operation HOPE, a HUD-Approved Housing Counseling Agency, provides free foreclosure counseling services to homeowners around the country by helping them develop a budget, evaluate loan options, ascertain challenges, and communicate with lenders. HUD housing counselors have been trained and certified by the federal government to evaluate the financial status of homeowners and offer solutions for those unable to meet their mortgage loan payments.
On average, every three months, 250,000 homeowners enter into foreclosure, and although a housing counselor cannot ensure that a homeowner will be able to keep their home, they can provide valuable options.
If a homeowner is facing forthcoming foreclosure or have received a legal notice, they may also want to consult with a real estate attorney. Oftentimes, it is necessary for an attorney to assess whether a foreclosure is legitimate since banks sometimes fail to follow the correct procedures for initiating a foreclosure.
The following steps should be taken before contacting a foreclosure mitigation or housing counselor:
The last thing homeowners who are having difficulty meeting mortgage payments should do is avoid their lender. By being upfront about financial difficulties, homeowners may be able to work with their lenders to modify their loan so that the payments are more affordable. Lenders often have workout options to help homeowners keep their home, especially when the loan is only one or two payments past due.
In order to find their lender, homeowners should check their monthly mortgage billing statement or payment coupon book for their lender contact information, or visit the Housing and Urban Development website for guidance.
The information a homeowner should have ready when contacting their lender is their loan account number, a brief explanation of their circumstances, recent income documents, such as pay stubs or benefit statements from social security, disability, unemployment, retirement or public assistance, and a list of household expenses.
Contact a Housing Counselor
After contacting their lender, homeowner should contact a foreclosure mitigation or housing counselor to assess their financial situation, review available options, and request help in negotiating with their lender. Foreclosure mitigation and housing counselors will inform homeowners of several workout arrangements that lenders may provide, and offer advice on what course of action to take based on the homeowner’s circumstances. The counselor can also call the lender on the homeowner’s behalf to discuss a workout plan.
By contacting a counselor before their mortgage payments are too far behind, homeowners can protect themselves from additional credit problems in the future. A counselor can help establish a monthly budget plan to cover all expenses including the mortgage loan. A personal financial plan will show how much money is available to meet the mortgage payment. With this information, a lender can set a reduced or delayed payment schedule. A counselor will also provide information on services, resources, and programs available in a homeowner’s local area that can offer financial, legal, medical, or other assistance.
After contacting the lender and a foreclosure mitigation or housing counselor, a homeowner will typically be provided with a loan workout package by their lender. This package will contain information, forms, and instructions. A counselor can assist in filling out the forms, which should be completed and returned to the lender immediately. The completed package will be examined and a solution will be proposed.
Beware of Scam Artists
While seeking out a housing counselor, homeowners are often preyed upon by scam artists who can entice them with high cost mortgages, which can make financial problems worse and increase the risk of losing their home. Scam artists may suggest signing over the property in return for making the mortgage payments. Homeowners are advised to beware of solutions that involve payments in exchange for mortgage modification. The general rule of thumb in these situations is that if an offer sounds too good, it probably is.
Recently, HUD released the Homeowners Guide to Success which offers homeowners advice regarding foreclosure.
“This guide arms consumers with easy to understand, reliable information about the assistance available to help them keep their homes. Valuable information like this can make a tremendous difference in the lives of homeowners who may be faced with foreclosure,” HUD Secretary Ben Carson said.
The guide addresses issues like what happens if a payment is late and also touches upon some mortgage assistance solutions provided by servicers to help homeowners avoid foreclosures. It provides homeowners with details on how plans like repayment, modification, short sale and deed in lieu of foreclosure work when they partner with a servicer and which plan could be most suitable for them.
This guide also includes tips on how to avoid foreclosure assistance scams.
“Steering consumers away from fraudulent schemes is especially important when they are already facing the difficult situation of not being able to make their mortgage payment,” Sarah Gerecke, Deputy Assistant Secretary for the Office of Housing Counseling at HUD said.
The Federal Trade Commission (FTC) has recently shut down a massive mortgage relief scheme executed by a number of law firms that falsely promised homeowners that they would save their homes in exchange for thousands of dollars in legal fees.
According to the FTC, law firms defrauded millions of dollars out of homeowners facing foreclosure by urging them to join a “mass joinder” lawsuit against their mortgage holders that would liquidate their mortgage, provide compensation, or both.
“Preying on homeowners who already are financially distressed and struggling to pay their mortgages is appalling,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “That’s why stopping phony mortgage relief operations, like this one, is a priority at the FTC.
To find a HUD counselor in a specific state, visit the HUD Approved Housing Counseling Agencies. Homeowners can also call 888-995-HOPE™ (4673), 24 hours a day, 7 days a week, 365 days a year for help in more than 170 languages. Homeowners can also contact a Foreclosure Mitigation Counselor in their state by visiting neighborworks.org.