Foreclosure can occur. Foreclosure is the legal means by which your lender can repossess (or take back) your home. When this happens, you must move out of your home. If your property is worth less than the total amount you owe on your loan, your lender or HUD could seek a “deficiency judgment.” This means that in addition to losing your home, you still owe your lender the additional debt and will be required to pay it back.
Foreclosure is one of the most damaging things on your credit report and can seriously affect your ability to qualify for credit in the future so it should be avoided if at all possible.
The worst thing you can do is do nothing. If your lender has tried to contact you, do not ignore them. If you are having problems making your payments, contact your lender immediately. Be prepared to provide them with financial information, such as monthly income and expenses.
It is also important to remain in your home while you are working with your lender. If you abandon your property, it may disqualify you for assistance.
Contact NHSB immediately to register for one of our monthly foreclosure prevention workshops.
Our foreclosure prevention counselors have received certification in foreclosure prevention and credit counseling from NeighborWorks® America. They have also received additional certification in the following areas: Loss Mitigation and Home Equity Conversion Counseling (HECM) provided by the Department of Housing and Urban Development (HUD); Identity Theft Prevention and Intervention training from the Federal Trade Commission; and MoneySmart™ certification provided by the FDIC. One counselor is bi-lingual (English/Spanish) and the other is a licensed attorney-at-law.
All of our services are provided to our clients free-of-charge.
Every situation is different and every lender is different, but there are several alternatives available to homeowners seeking to avoid foreclosure.
A loan modification is a change to the original terms of your mortgage through one or a combination of the following methods:
NOTE: Loan modifications require prior approval from the loan’s investor and a loan modification fee. A cash payment toward any loss to the investor may also be required and the homeowner may be asked to comply with other additional requirements from the lender/investor.
Total reinstatement involves bringing your loan current with a single payment. You will be required to provide a certified check in an amount which includes all past due payments, late charges and fees that have been assessed to your account.
Some lenders will allow the homeowner to repay the past due amount over a period of months by paying a full payment plus a partial payment on the past due balance.
A forbearance plan allows the homeowner to reduce or suspend payments for a period of time, but then requires the homeowner to re-pay the deferred payments in a manner similar to a re-payment plan.
FOR FHA HOMEOWNERS
You may qualify for a PARTIAL CLAIM in which your lender can work with you to obtain a one-time payment from the FHA insurance fund to bring your mortgage current.
Homeowners who qualify are:
NOTE: When your lender files a PARTIAL CLAIM, HUD will pay your lender the amount necessary to bring your mortgage loan current. You will be required to sign a Promissory Note and a lien will be placed on your property until the Promissory Note is paid in full.
The Promissory Note is interest free and is due when you pay off your mortgage or sell the property.
FOR HOMEOWNERS WITH VA (VETERAN ADMINISTRATION) GUARANTEED LOANS Contact the Veterans Affairs Department at (205) 731-0550.
If you are unable to maintain ownership of your home, there are several alternatives to foreclosure that can help protect your credit score.
PRE-FORECLOSURE OR SHORT SALE
A short sale involves selling your property at less than fair market value before the foreclosure sale. In some cases, fair market value may be less than what is owed on the home so prior approval from the investor will be required. The homeowner may also be required to make a cash payment toward any loss the investor may have incurred and agree to comply with other additional requirements by the lender/investor.
DEED IN LIEU OF FORECLOSURE
This involves signing the deed over to the investor prior to a foreclosure sale. This alternative is only granted as a last resort, and usually only in cases that involve the death of the mortgagor and/or after an unsuccessful attempt to sell the property at fair market value has been made.
Proof will be required that the property was marketed for a period of time at fair market value and in cases of death, a copy of the Death Certificate will be required.
A DEED IN LIEU OF FORECLOSURE requires prior approval of the investor and clear title to the property. A cash payment to the investor may be required as well as compliance with any additional requirements made by the investor/lender.
FOR FHA HOMEOWNERS
Homeowners who have their loans insured by FHA may qualify for a SPECIAL PROVISION TYPE I CAUSE OF DEFAULT – UNEMPLOYMENT option. This option is for the mortgagor who is in danger of foreclosure because they have lost their job and have no prospects for future employment, but who had maintained a good payment history and stable employment history up until the time they lost their job.
In this case, FHA will place the homeowner’s payments on hold for up to six months.
To qualify, the homeowner must agree to:
Please Note: If you have received a Notice of Foreclosure from your lender with a Date of Sale that is less than thirty days from one of our workshops, please contact Alabama Legal Services at (866) 456-4995.