• Unplanned expenses or a loss of income: An emergency car or home repair or unexpected medical bills can leave you short of funds to pay your other bills.
• A long-term or permanent loss of income due to a layoff, a reduction in overtime hours, a divorce, or an injury or illness that keeps you away from work could affect your ability to make your full mortgage payment not just this month, but for many months.
• A home loan that requires a large increase in monthly payments: More than ever, borrowers are in loans that are structured so that at some point (often between one and five years after you make the first payment) the required monthly mortgage payment goes up significantly.
• Depending on the loan terms and prevailing interest rates at the time the rate adjusts or “resets,” your monthly payment can increase by many hundreds of dollars.
• Predatory loan terms: A predatory loan includes unfair or deceptive terms, high rates and costly fees, payment requirements that the lender knows will be difficult for you to meet, or features that get you deeper into debt and strip your equity. Since these loans are often unaffordable from the outset, the risk of foreclosure is very great.
• By some estimates, one in five homeowners are at risk of losing their homes due to these types of loans. Despite your best efforts to plan for emergencies, prepare for higher payments and avoid abusive lenders, you may still find yourself in default (missing one or more payments). If that happens, you may still save your home from foreclosure by understanding your options and taking the appropriate steps.
Keeping your homeMany homeowners believe that all lenders are eager to foreclose and take possession of their property.
The predatory or abusive lenders may intentionally lend money with the goal of pursuing foreclosure and repossessing the home.
Legitimate mortgage lenders prefer to receive your loan payments, and will foreclose only as a last resort because it is a costly and time-consuming process.
Lenders are required to explore options to keep borrowers in their homes.This means your lender may offer special “loss mitigation” programs to help committed borrowers avoid foreclosure.
Dos and don'ts for homeowners facing foreclosure
• Sign anything that you do not fully understand. If you are unsure, have all documents reviewed by an attorney, a trusted real estate professional, or a counselor at a HUD-approved housing counseling agency.
• Deed your property over to anyone. Signing your home over to someone else does not relieve you of your mortgage obligation.• Let someone assume the loan without the lender’s permission and without their formally releasing you from liability for the mortgage.
• Move out of your house because someone promises to make the mortgage payments for you.
Do:
• Be suspicious of anyone who contacts you with a loan or service they promise will solve your money troubles and save your home.
• Avoid high-pressure lenders, or those who encourage you to pay an upfront fee for any service or loan, borrow more than the value of the home, or take on a loan without considering your ability to make the payments.
• Get all terms and promises in writing.• Be on the lookout for terms that change or are not disclosed at the beginning of the loan process.
• Avoid any refinancing loan with exorbitant fees, a stiff prepayment penalty, an excessively high interest rate, or a balloon payment due. (If you’re not sure whether the loan you’re being offered includes any of these abusive terms, have someone you trust review them for you.)
•
Check for complaints about any company that offers to buy your
home. Contact your state’s consumer protection office (click here to
find your office) or your state’s real estate regulator (click here to find
your regulator)