Question 1

What is foreclosure?

Accepted Answer

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.

Question 2

What happens when a mortgage payment is missed?

Accepted Answer

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.

Question 3

How can a foreclosure be avoided?

Accepted Answer

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:
1. Contact your lender as soon as you know your payment will be late.
2. Never ignore the lender's letters or phone calls.
3. Don't assume that your situation is hopeless.

Question 4

What are some other solutions for “Long-term” problems to avoid foreclosure?

Accepted Answer

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:

Mortgage Modification – If you can  currently make your regular payment, but can’t catch-up on the past due  amount, the lender may agree to modify your mortgage. One way is to add  the past due amount into your existing loan and finance it long-term.  Mortgage Modification may also be possible if you no longer can make  your payments at the former level. The lender may modify your mortgage  and extend the loan length, or perhaps take steps to reduce your current  payments.

Pre-Foreclosure Sale – Foreclosure  can be avoided by selling your property for a lesser amount necessary to  pay off your mortgage loan. You may qualify if:
1. The loan is at least 2 months delinquent
2. The house is sold within 3-5 months
3. A new appraisal, that the lender will obtain, indicates that the home value meets program guidelines.
4. 
Deed in Lieu of Foreclosure – This  is when the lender allows you to give-back your property and forgives  the debt. It does have a negative impact on your credit record; however  it's better than foreclosure. The lender may require that house be "For  Sale" for a specific time period before agreeing. This route may not be  possible if there are other liens against the home.

For FHA Loans – The lender may  assist you in getting a one-time payment from the FHA Insurance Fund.  The homeowner must prove the ability to resume making full mortgage  payments on time, and other conditions apply:
 • 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.

For VA Loans – The Veteran's  Administration Loan Centers offer financial services designed to help  homeowners avoid Foreclosure, and options for your specific situation.

Question 5

What are some other solutions for “Temporary” problems to avoid foreclosure?

Accepted Answer

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.
Forbearance – It may be allowed to  delay payments for a short period with the understanding that another  option will be used to bring the account current later.
Repayment Plan – If your account is  past due, but you can now make regular payments again, the lender may  allow you to catch-up by adding a portion of the overdue amount to a  certain number of monthly payments until your account becomes current.
Partial Claim – Your lender may be  able to help you obtain a one-time payment from the FHA Insurance Fund  to bring your mortgage current, if you qualify:
You may qualify if you are able to begin making full mortgage payments again.
When your lender files a Partial Claim on your  behalf, the U.S. Department of Housing & Urban Development will pay  your lender the amount necessary to bring your mortgage current. You  must execute a Promissory Note and a Lien will be placed on your  property until the note is fully paid. The note is interest-free and is  due when you pay off the first mortgage, or when the property is sold.

Mortgage Basics
Foreclosure

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Mortgage Basics Foreclosure

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Mortgage Basics
Foreclosure