Senior Homeowners and Avoiding Foreclosure
by Sam Collins
When I hear about senior homeowners facing foreclosure, I find this subject tremendously troublesome. It seems I am encountering more and more senior homeowners experiencing the possibility of foreclosure, which leads to losing their home and no place to live.
Case Study:
Here is one of my most recent encounters with a senior facing foreclosure. I received a call from a senior who was in a panic. She was a 78 widower and was quite upset about her situation. She indicated she was going to foreclosure on June 15th. Now this was June 3. I went to work quickly to meet with her that day to determine exactly all the facts. I was able to meet with her two hours later. I found that she had only one mortgage for about $19,000 with a home value of about $125,000.
It was obvious during our meeting, our client was very nervous and concerned about the idea of losing her home. By the next day I had contacted the court, the appraiser, she had her counseling completed, and the foreclosure stopped. No doubt our Senior was quite happy and relieved she would not be living on the street.
I hope you never have to face the threat of having a foreclosure, however knowing what to do and the resources available are important. Here are a few:
Q: What Happens if I Miss My Mortgage Payments?
Foreclosure may occur. This is the legal means that your lender can use to repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued. If that happens, you could lose your home,
Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if possible.
Q: What Should you Do?
DO NOT IGNORE THE LETTERS FROM YOUR LENDER. If you are having problems making your payments, call or write to your lender’s Loss Mitigation Department without delay. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help.
Stay in your home for now. You may not qualify for assistance if you abandon your property.
Contact a HUD-approved housing counseling agency. Call (800) 569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you.
Q: What Are Your Alternatives?
You may be considered for the following:
Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.
Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.
Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily “give back” your property to the lender. This won’t save your house, but it is not as damaging to your credit rating as a foreclosure.
You may qualify if:
- you are in default and don’t qualify for any of the other options;
- your attempts at selling the house before foreclosure were unsuccessful; and
Q: How Do I Know if I Qualify for Any of These Alternatives?
Your lender will determine if you qualify for any of the alternatives. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender. Call (800) 569-4287 or TDD (800) 877-8339.
Q: What other things should you be aware?
Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If you’re selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your financial difficulty. Be especially alert to the following:
Equity skimming. In this type of scam, a “buyer” approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The “buyer” may suggest that you move out quickly and deed the property to him or her. The “buyer” then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.
Phony counseling agencies. Some groups calling themselves “counseling agencies” may approach you and offer to perform certain services for a fee. Be careful. Check with the local chamber of commerce or the state division of consumers.
Q: Are There Any Precautions I Can Take?
Here are several precautions that should help you avoid being “taken” by a scam artist:
Don’t sign any papers you don’t fully understand.
Make sure you get all “promises” in writing.
Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt.
Check with a lawyer or your mortgage company before entering into any deal involving your home.
If you’re selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state’s Attorney General, the State Real Estate Commission, or the local District Attorney’s Consumer Fraud Unit for this type of information.
Q: What Are the Main Points I Should Remember?
Don’t lose your home and damage your credit history. Call or write your mortgage lender immediately and be honest about your financial situation.
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.
Act now. Delaying can’t help. If you do nothing, You stand the chance of losing your home and your good credit rating.
Always consult with a trusted friend, accountant or lawyer when faced with the likeness of a foreclosure.
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