NeighborWorks Blackhawk Region provides Foreclosure Prevention (Loss Mitigation) counseling if you get behind on your mortgage payments or, due to circumstances, can no longer afford your home. We can assist you through the process of trying to keep your home, and help you understand your options and rights.
We can talk to your lender on your behalf, and help you negotiate a resolution for your delinquency. Or if you aren’t able to keep your home, we can advise you on the best way to make the transition, helping you to minimize damage to your credit and getting you back on your feet.
The most important thing to remember is to always keep an open communication with your lender. If you know ahead of time that you are going to be late with a payment, call your loan servicer to let them know your situation and ask them what options you may have.
Possible options available:
- Reinstatement. If you are able to get a loan from family, friends, or an agency to pay off the amount you are behind, your loan will be back on track. You may need to get a part-time job, get some extra income, or drastically change your spending habits for a time until you get back on your feet and build up some reserves.
- Loan Modification. The loan can be restructured to change some of the terms of the loan, such as the due dates, payment amount, and interest rate, to help lower your monthly payment.
- Forbearance. Some lenders will allow you to postpone some or all your payments for a specified time. You may qualify if you can show that the reason you fell behind was beyond your control and for a limited time. You need to prove that eventually you will have enough income to cover the monthly payment plus what you are behind.
- Refinancing. This option works if you have equity in your home and if it lowers your payment. This will not work if the reason you are behind is overspending or credit card overuse. Also, a poor credit score might lead to less favorable terms in a new mortgage.
- Partial Claim. This option is for loans that are FHA insured. The lender lends you the amount that you are behind to bring the loan current, then places a second mortgage on your home and sets the terms under which you need to pay the loan back. You need to show that you have enough income to cover both payments.
Alternatives to Foreclosure
- Foreclosure Presale. You can sell the house prior to the foreclosure sale. Sell the house for at least what you owe the lender, and move on.
- Short Sale. A real estate agent who specializes in short sales convinces your lender to agree to take less than what you owe and accept whatever the house can sell for. For example, you owe $90,000, the most you can get for the house is $79,000, and the lender agrees to take the lower amount.
- Deed in lieu. When it becomes evident that you cannot maintain your payments anymore, you deed the house back to the lender. A tax professional can explain any tax implications.