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How To Save Your Home From Foreclosure

By Mark Cole President & Chief Executive Officer at HLP (Hope LoanPort)

Despite a strong economy and record low unemployment, some homeowners will suffer a financial setback and have trouble paying their mortgage. People fall behind on their mortgage payment for a variety of reasons, but the primary ones are loss of a job, divorce and unexpected major expenses, such as major medical bills. Often, people in these situations do not have any emergency savings or have reached the limit on their credit cards or other ways to borrow money.

Almost any homeowner that falls behind on their monthly mortgage payments faces the possibility of foreclosure. Once a homeowner is behind on their payments, lenders will begin sending notices demanding payment and possible penalties.  As more time passes without a resolution, formal legal notices and actions related to the foreclosure process will commence.

If you suffer a financial setback and fear you may not be able to make your mortgage payment, there are several actions you can take to keep your home. Here are some immediate steps to take to help keep your home:

Make Immediate Changes to Reduce Spending.  It’s important to continue making your mortgage payments, so start by tightening up your budget so that your spending supports your goal of keeping your home. Get the whole family involved so that you focus on addressing your needs and cutting back all non-essential expenses. You don’t want to fall behind on payments and incur possible penalties.

Find the Cash Needed to Continue Making Each Mortgage Payment. If you’re able, look for a part-time job or other gigs that can help bring in additional income.  You may also sell household items or even a second car to raise the needed cash.  Use some of your emergency savings to make payments or consider asking friends or relatives for a one-time gift or loan. However, don’t raid your retirement accounts for cash, as there are significant penalties and tax consequences for these withdrawals.

Talk to Your Servicer.  It’s important not to hide if you can’t make your payments on-time.  Reach out to your servicer to tell them about your situation.  Many times, they will have short-term option, such as a forbearance, that can help you make it through a temporary problem. 

Contact a Nonprofit Housing Counseling organization. If you feel overwhelmed, these organizations, approved by the US Department of Housing and Urban Development (HUD), can provide information and assistance needed to avoid foreclosure. Housing counselors will help you understand all possible options and work with your mortgage company to find a solution. These agencies are often funded, in part, by HUD and NeighborWorks® America, and are free of charge. There is no need to pay a private company for these services. To find out more, visit https://www.hud.gov/i_want_to/talk_to_a_housing_counselor.

Consider Applying for Loan Modification Directly to Your Lender. If your financial setback is permanent and will have a long-term impact on your ability to make mortgage payments, consider a loan modification. A loan modification changes the terms of your loan to make it more affordable, and many lenders will work with homeowners to do just that.

Before considering this request, lenders will require a variety of documents. Homeowners can use HLP’s Homeowner Connect website to submit information and documents directly to your mortgage company to request a loan modification. Homeowners can also chat online with a nonprofit housing counselor while filling out the documents to guide you or answer any questions. Check to see if your mortgage company participates and begin the process by going here create a secure account.

Consider a Short Sale or Deed-in-Lieu. Unfortunately, not all homeowners will be able to achieve a loan modification or other solution to prevent foreclosure. While this outcome means the homeowner and their representative will face difficult choices, HLP may still be able to help.

Homeowners that cannot continue to afford their home may want to consider a short sale or deed-in-lieu. These two options enable the homeowner to leave the home without a foreclosure as part of their credit history. HLP can help the homeowner or their representative understand all of their options and connect them with a mortgage company that may consider these “non-retention” options.