HOW TO AVOID FORECLOSURE
Take steps to avoid losing your home and ruining your credit
With foreclosures were up 42 percent nationally and 44 percent in Westchester County from 2005 to 2006 and an estimated $1.5 trillion in adjustable rate mortgages due for an interest-rate hike in 2007, experts predict foreclosures are going to get worse before they get better. Find out the facts about foreclosure and learn how to protect yourself from losing your home.
What is foreclosure?
Foreclosure is a legal action brought by a lender against a borrower who has defaulted on a mortgage loan. If foreclosure is granted, the borrower sells the house at a foreclosure auction, and the proceeds of the sale are used to pay off the loan. If the house is sold for less than the balance of the loan, the borrower not only loses title to the house but still owes the unpaid amount.
What Should I Do?
DON’T stick your head in the sand and ignore warning letters from your bank or lender. The problem will not go away, and will only get worse if you ignore it.
DO contact a reputable counseling agency approved by the Department of Housing and Urban Development (HUD). A list of agencies is available at www.hud.gov or by telephone at 1-800-569-4287 or TDD 1-800-877-8339.
DO contact your lender as soon as you know your payments will be late. Tell the lender about your financial situation, and try to refinance the loan or work out a payment plan.
DO stay in your home for now, seek assistance, and explore every alternative.
DON’T assume that your situation is hopeless and nothing can be done to solve the problem. Remember: most lenders want to avoid foreclosure as much as you do.
What Are My Alternatives?
FORBEARANCE: Your lender may agree to let you temporarily delay payments or pay less than the full amount of your monthly mortgage payment. This will be considered if you have recently experienced a stoppage or reduction in income, or an increase in expenses, and you can show that you will be able to catch up at a specified time in the future.
MORTGAGE MODIFICATION: Your lender may agree to permanently change the terms of your mortgage or extend the length of the loan so that it will be more affordable to you.
REPAYMENT PLAN: If you have missed some payments, your lender may agree to let you add a portion of the past due amount to upcoming payments until you catch up and your account is current.
SELL YOUR HOME: If catching up is not a possibility, you can consider putting your home up for sale. Even if you can’t get the full market price, it’s better than going through foreclosure. Your lender may agree to give you some time to sell the house, and may agree to accept the sale price in full satisfaction of the loan, even if the proceeds are less than the outstanding loan balance.
DEED IN LIEU OF FORECLOSURE: The lender may allow you to “give back” your property in full satisfaction of the loan. You’ll lose title, and this will have a negative effect on your credit rating - - but less so than a foreclosure.
How Do I Know Which Choice is Best for Me?
Consult with a reputable counseling agency or with your attorney.
What Should I Look Out For?
DON’T become a victim of a foreclosure rescue scam. Con artists are targeting vulnerable homeowners who are facing foreclosure, promising a “fresh start” that will allow homeowners to pay off their mortgage arrears and keep their homes. But the reality is that these con artists are out to steal titles, not to provide assistance.
DON’T fall for promises that sound too good to be true. That’s a tell-tale sign of a scam.
DO be suspicious of anyone who solicits you uninvited by mail, telephone, flyer or in person.
DON’T sign any documents without consulting with an attorney or counseling agency.
DO get everything in writing.
DON’T enter into oral agreements.
DON’T sign over your deed to a third-party or agree to any deal that supposedly allows you to rent the property and buy it back later.
DON’T sign any documents without reading them first.
DON’T make your mortgage payments to anyone other than the lender.
DO know your rights. Under New York law, you have an absolute right to cancel a deal with a “foreclosure rescue specialist” within five days of signing the contract.
DO seek help if you’re caught up in a foreclosure rescue scam. Contact a reputable counseling agency. If you’re low income, you may also qualify for free legal services. See www.lawhelp.org/ny for further information about free legal services.