If you don't pay your monthly mortgage payments over a period of time, the mortgage company can
foreclose. This means you will lose title to your property and may be evicted from your home.
A foreclosure becomes part of your credit report and may adversely affect your ability to obtain credit
in the future. To avoid possible foreclosure, it is helpful to have money saved to cover several months
of your housing costs in case of an unexpected emergency, like job loss, divorce or separatio n, serious
illness, or the death of a loved one.
What if You Cannot Pay Your Mortgage?
What if You Can No Longer Afford to Keep Your Home?
Beware of Scam Artists
What if You Cannot Pay Your Mortgage?
1. Call your mortgage company now!
As soon as you realize that you are unable to make your payments, talk about your circumstances with
the mortgage company to which you send your monthly mortgage payment. Your options to retain your
home are most effective when you are only one or two payments behind.
Too many people in financial trouble wait until the last minute to call their mortgage company. Some
hope their problems will quickly resolve themselves. Others worry the mortgage company will rush to
collection or foreclosure. The truth is: the longer you wait, the greater your chance of losing your home.
If you are unable to make your mortgage payment, don't delay–call your mortgage company
immediately. In a significant number of all foreclosures, the borrowers did not return their mortgage
company's calls or written invitations to discuss payment options.
Depending upon your situation, your mortgage company may be able to provide you with temporary
financial relief. Here are a number of alternatives to discuss with your mortgage company.
Forbearance is an agreement to temporarily let you pay less than the full amount of your
mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies
may consider forbearance when you can show that funds from a bonus, tax refund, or other
source will let you bring the mortgage current at a specific time in the future.
A reinstatement occurs when you pay your mortgage company the total amount you are
behind, in a lump sum, by a specific date. This is often combined with forbearance.
A repayment plan is an agreement that gives you a fixed amount of time to repay the amount
you are behind by combining a portion of what is past due with your regular monthly payment.
At the end of the repayment period you have gradually paid back the amount of your
mortgage that was delinquent.
A loan modification is a written agreement between you and your mortgage company that
permanently changes one or more of the original terms of your note to make the payments
more affordable. Common loan modifications include
o Adding missed payments to the existing loan balance
o Making an adjustable-rate mortgage into a fixed-rate mortgage
o Extending the number of years you have to repay
2. Contact A Non-Profit Housing Or Credit Counseling Agency
Non-profit housing and credit counselors can help you analyze your financial situation. They also can
help you organize a budget to pay your mortgage and other monthly expenses–without your mortgage
company's direct involvement. Finally, these agencies can help you find and take advantage of local
services or programs that provide financial, legal, medical or other support.
You can find a credit counseling agency in your local phone book or by contacting the U.S.
Department of Housing and Urban Development (HUD) at (800) 569-4287 on weekdays between 9:00
a.m. and 5:00 p.m. Eastern time. You can find a list of HUD-approved agencies on their web
What If You Can No Longer Afford to Keep Your Home?
If you cannot or do not want to keep your home, your mortgage company can work with you to avoid
foreclosure. This can help reduce the negative effect on your credit reputation. There are several
different ways this might occur depending upon your financial circumstances:
An assumption permits a qualified buyer to take over your mortgage debt and pay the
mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to
sell your property and avoid foreclosure.
If you can sell your house but the sale proceeds are less than the total amount you owe on
your mortgage, your mortgage company may agree to a short payoff and write off the portion
of your mortgage that exceeds the net proceeds from the sale.
Your mortgage company may agree to a deed-in-lieu of foreclosure if you agree to voluntarily
transfer title of your property to your mortgage company in exchange for cancellation of your
mortgage debt. In most cases, you must attempt to sell your home for its fair market value for
at least 90 days before a mortgage company will consider this option. This option may be
unavailable if there are other liens on your home, such as judgments from other creditors,
second mortgages, or tax liens.
Beware of Scam Artists
Predatory lenders often target people in financial distress. They try to panic you into high cost
mortgages, making financial problems worse and increasing your risk of losing your home. Predatory
lenders usually offer loans with
High interest rates
Unnecessary costs like pre-paid life insurance
Unaffordable repayment terms
Here are some tips to protect you from predatory lenders:
Be suspicious of anyone who offers you "bargain loans," whether they mail, fax or e-mail an
offer to you, call you on the phone, or come to your door.
Beware of promises of "No Credit? Bad Credit? No Problem!" and offers that are only "good
for a very short time".
Avoid lenders who encourage you to borrow more than you need or more than the value of
Beware of terms that change at the last minute or offer next-day approval based on
prepayments or up-front fees.
Do not sign anything you do not understand. It is your right and duty to ask questions.
Beware of phony credit counseling agencies charging high fees for financial counseling
services you can get for little or no charge through non-profit agencies. You can find a list of
HUD-approved agencies by visiting their web site.
REMEMBER:Anything that sounds too good to be true usually is! If you suspect a predatory mortgage
company is targeting you, call your local office of consumer affairs, the Federal Bureau of
Investigation, an approved credit counseling agency or your local Don't Borrow Trouble