Reasons for Pending Foreclosure

Homeowners sometimes find themselves unable to make timely mortgage payments. This happens for a variety of reasons, including:

• Job loss
• Excessive debt obligations
• Job demotion
• Divorce
• Inability to pay an adjustable interest rate that increases
• Illness
• Death in the family

How to Avoid Foreclosure

^{from the U.S. Department of Housing and Urban Development}

• Don't ignore the problem.

  The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.

• Contact your lender as soon as you realize that you have a problem.

  Lenders generally want to avoid foreclosure but will file a Notice of Default to protect their interests, if necessary. The best way to avoid foreclosure is to file a Notice of Default. If you project that you will be unable to make your mortgage payment, you should first call your lender. He might offer these options.

• Open and respond to all mail from your lender.
  The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notices of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.

• Know your mortgage rights.
  Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.  

• Understand foreclosure prevention options.
  Valuable information about foreclosure prevention (also called loss mitigation) options can be found online.

• Contact a HUD-approved housing counselor.
  The U.S. Department of Housing and Urban Development (HUD) funds free or very low-cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender, if you need this assistance. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.

• Prioritize your spending.
  After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses--cable TV, memberships, entertainment--that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.

• Use your assets.
  Do you have assets--a second car, jewelry, a whole life insurance policy--that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.  

• Avoid foreclosure prevention companies.
  You don't need to pay fees for foreclosure prevention help--use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD-approved housing counselor will provide free if you contact them.

• Don't lose your house to foreclosure recovery scams!
  If any firm claims they can stop your foreclosure immediately and if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional or a HUD-approved housing counselor.

^{"Foreclosure Tips/U.S. Department of Housing and Urban Development (HUD)." HUD.gov. 31 Mar 2002. U.S.Department of Housing and Urban Development. 29 April 2010. <http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure/foreclosuretips>}

Stopping Foreclosure

If you cannot become current with your payments and your lender will not work with you, you can attempt the following options:

• Sell Your Home.
  Find a Real Estate Agent to assist you in valuing, marketing, and selling your home, pre-foreclosure.

• Consider a Short Sale.
  If you owe more than your home is worth, you could possibly make a short sale. Although a short sale effects your credit, it's not as bad as foreclosure. Have your Agent negotiate a short sale with your lender.

• Sign a Deed-in-lieu of Foreclosure.
  This will deed the home back to the lender. The lender forgives the mortgage after the homeowner gives him a properly prepared and notarized deed. This cancels the foreclosure action.

Most Importantly

1. Do what you can to prevent losing your home and damaging your credit. Explore every alternative to keep your home.
2. Call your lender as soon as your financial situation changes.
3. Cooperate with the counselor or lender trying to help you.
4. Stay in your home to make sure you qualify for assistance.
5. Arrange an appointment with a HUD-approved housing counselor to explore your options.
6. Beware of scams.
7. Do not sign anything you don't understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.