by admin | Nov 7, 2019 | Getting Help, Pro Help, Tips & Tricks
Your credit score will take a hit after foreclosure, short sale, or deed in lieu of foreclosure. Learn more.
If you stop making payments on your mortgage loan, you’ll probably go through a foreclosure, which will damage your credit score. Even if you manage to avoid going through a foreclosure with a short sale or a deed in lieu of foreclosure, your credit score will take a major hit.
Read on to learn the basics about why credit scores matter, how they work, and how a foreclosure, short sale, or deed in lieu of foreclosure typically hurts your credit score.
Credit Scores: Why They Matter, How They Work
If you apply for home loan or other form of credit, like a credit card or a car loan, the creditor will take a look at your credit score from one or more of three major credit reporting agencies—Equifax, Experian, and TransUnion—as part of the process of figuring out whether or not to extend you the credit. Credit scores, in theory, indicate whether you’re likely to default on the loan. Generally, people with lower credit scores are more likely to default on payments than people with higher scores.
Your credit score is based on what’s in your credit report, including:
- the payment history on your outstanding debts
- how many debts you have and how much you owe
- how long your credit history is
- the different kinds of credit you have
- whether you’ve recently applied for new credit, and
- whether you’ve been through a foreclosure or have declared bankruptcy.
Credit scoring companies use “models” that analyze this data and then assign a credit score based on that information. Different companies use different scoring models so a person’s credit score usually varies by a few or many points depending on which company and model generated the score.
Typically, credit scores—like scores from the largest and most universal credit scoring company called FICO—range from 300 to 850. VantageScore, which is another credit scoring company, also uses a range of 300 to 850 in its newer model, while its older models have a range of 501 to 990.
How Foreclosure Affects Your Credit Score
Both missed mortgage payments and a foreclosure itself will damage your credit score.
How missed (or late) payments affect your score. Under federal mortgage servicing rules, in most cases, a borrower has to be more than 120 days delinquent on payments before the servicer can officially start a foreclosure. The lender reports the missed payments as 30 days late, 60 days late, 90 days late, and the like to the credit reporting agencies. According to FICO, a person’s credit score drops about 50 to 100 points when the lender reports the account as 30 days past due and each subsequent delinquency lowers the score further.
How foreclosure affects your score. After a foreclosure, your score will likely go down by at least 100 points. How much the score actually falls depends to some extend on your score before the foreclosure started. Someone with a higher score prior to a foreclosure generally loses more points than someone who already has a low score. According to FICO, a person who has a credit score of 680 prior to a foreclosure loses 85 to 105 points following a foreclosure. But a person who has a credit score of 780 prior to a foreclosure loses 140 to 160 points.
How a Short Sale or Deed in Lieu of Foreclosure Affects Your Credit Score
Completing an alternative to foreclosure, like a short sale or deed in lieu of foreclosure (DIL), will also usually hurt your credit score.
Generally, short sales and DILs have a similar effect on a person’s credit score. Much like with a foreclosure, if you have high credit score before the short sale or DIL—say you complete one of these transactions before missing a mortgage payment—the transaction will cause more damage to your credit score. Though, if you’re behind on your payments and already have a low score, a short sale or DIL won’t cause you to lose as many points as someone who has a high score.
Also, if you’re able to avoid owing a deficiency after the short sale or deed in lieu of foreclosure, your credit score might not fall quite as much.
Beware of Credit Repair Scams
Scammer credit repair companies sometimes try to sell their services claiming that they can easily repair your credit score or even clear a foreclosure off your credit report. However, foreclosures and many other negative items typically stay on a credit report for seven years and you can’t magically eliminate them—though the impact of these events on your score will lessen over time. Also, paying your other debts on time and disputing incomplete and inaccurate information in your credit report can improve your score.
Getting Help
If you want more information about how to improve your credit score, consider talking to a credit repair attorney. If you have questions about ways to avoid a foreclosure, consider talking to a foreclosure attorney or a HUD-approved housing counselor.
by admin | Nov 7, 2019 | Getting Help, Laws and Rules, Tips & Tricks, What to do
Federal laws protect homeowners when facing foreclosure.
On January 10, 2014, new federal laws that protect homeowners in the foreclosure process went into effect. These laws protect consumers by:
- ensuring servicers provide assistance if a borrower is having difficulty making mortgage payments, and
- protecting borrowers from wrongful actions by servicers.
Keep reading to learn more about these federal laws and how they might help you if you’re facing a foreclosure.
Why the Need for Laws Protecting Homeowners?
During the foreclosure crisis that began around 2008, the number of homeowners in financial distress increased exponentially and servicers simply couldn’t keep up with the increased demands for information and assistance. As a result, servicing errors were common and egregious.
Servicers Now Must Provide Homeowners With Assistance
Now, under federal law, servicers are supposed to work with borrowers who are having trouble making monthly payments.
Early Intervention Requirements: Servicer Must Contact the Borrower By Phone (or In Person) and In Writing
If a borrower falls behind in payments, a servicer must attempt to contact the borrower to discuss the situation no later than 36 days after the delinquency, and again within 36 days after each subsequent delinquency, even if the servicer previously contacted the borrower. If appropriate, the servicer must tell the borrower about loss mitigation options—like a modification, short sale, or deed in lieu of foreclosure—that might be available to the borrower. But, if you filed for bankruptcy or asked the servicer to stop communicating with you under to the Fair Debt Collection Practices Act (FDCPA), and the servicer is subject to this law, the servicer doesn’t have to try to contact you by phone or in person.
No later than 45 days after missing a payment, the servicer must inform the borrower in writing about loss mitigation options that might be available, and must do so again no later than 45 days after each payment due date so long as the borrower remains delinquent. The servicer does not, however, have to provide the written notice more than once during any 180-day period. If you’ve filed bankruptcy or asked the servicer not to communicate with you, it generally has to send a modified letter, subject to some exceptions.
Continuity of Contact Requirements: Servicer Must Appoint Personnel to Help the Borrower
The servicer must assign personnel to help the borrower by the time the borrower falls 45 days delinquent. The personnel should be accessible to the borrower by phone and able to respond to borrower inquiries.
When applicable, the servicer’s personnel should help the borrower pursue loss mitigation options, like by advising the borrower about:
- available loss mitigation programs
- how to submit a complete loss mitigation application
- the status of a submitted application
- how to appeal (if the application is denied), and
- the circumstances when the servicer may refer a file to foreclosure.
The servicer may assign a single person or a team to assist a delinquent borrower.
Restrictions on Dual Tracking
Federal law also restricts “dual tracking.” Dual tracking happens when a servicer simultaneously evaluates a borrower for a loan modification (or other loss mitigation option) while at the same time pursuing a foreclosure.
Restrictions on Starting Foreclosure
Servicers generally can’t start a foreclosure until the loan obligation is more than 120 days delinquent, which provides time for the borrower to submit a loss mitigation application. A borrower is considered delinquent starting on the date a periodic payment sufficient to cover principal, interest, and, applicable, escrow becomes due and unpaid, until such time as no periodic payment is due and unpaid.
What is the first foreclosure notice or filing? In a judicial foreclosure, this means the foreclosing party can’t file a lawsuit in court to start the foreclosure until you’re more than 120 days behind. If the foreclosure is nonjudicial, the foreclosing party can’t begin the foreclosure by recording or publishing the first notice until you’re more than 120 days late in payments. If your state’s foreclosure laws don’t require a court filing or any document to be recorded or published as part of the foreclosure process, the first notice is the earliest document that establishes, sets, or schedules a date for a foreclosure sale.
Further restrictions on starting a foreclosure. Even if a borrower is than 120 days delinquent, if that borrower submits a complete loss mitigation application before the servicer makes the first notice or filing required to initiate a foreclosure process, the servicer can’t start the foreclosure process unless:
- the servicer informs the borrower that the borrower is not eligible for any loss mitigation option (and any appeal has been exhausted)
- the borrower rejects all loss mitigation offers, or
- the borrower fails to comply with the terms of a loss mitigation option such as a trial modification.
To learn more about how foreclosure works in your state, see our Key Aspects of State Foreclosure Law: 50-State Chart.
Restrictions on Continuing Foreclosure After the Borrower Requests Help
If the servicer has already started a foreclosure and receives a borrower’s complete loss mitigation application more than 37 days before a foreclosure sale, the servicer may not move for a foreclosure judgment or order of sale, or conduct a foreclosure sale, until one of the three conditions mentioned above has been satisfied.
A Motion to Reschedule the Foreclosure Sale Doesn’t Violate Federal Law
While federal law generally prohibits a servicer from moving for a foreclosure judgment or an order of sale after a borrower submits a complete loss mitigation application, the U.S. Court of Appeals for the 11th Circuit held that a motion to reschedule a previously set foreclosure sale doesn’t violate this law. (See Landau v. RoundPoint Mortgage Servicing Corporation, 925 F.3d 1365, 27 Fla. L. Weekly Fed. C 2045, (11th Cir. June 11, 2019)).
The servicer doesn’t have to review multiple applications after you become delinquent on the loan. But if you bring the loan current after submitting an application, you may submit another.
Applicability of the Laws
These laws apply to mortgage loans that are secured by a property that is the borrower’s principal residence. The determination of principal residence status depends on the specific facts and circumstances regarding the property and applicable state law.
For example, a vacant property might still be a borrower’s principal residence under certain circumstances, like when a servicemember relocates due to permanent change of station orders and was living at the property as his or her principal residence immediately prior to displacement, intends to return to the property at some time in the future, and doesn’t own any other residential property.
Getting Help
If you’re having trouble making your mortgage payments, consider submitting a loss mitigation application to your loan servicer. Once submitted, under federal law, the servicer has five days to tell you whether it needs more information—so long as you submit the application 45 days or more before a foreclosure sale—and, if so, what information it needs.
Generally, the servicer is required to evaluate the application for all loss mitigation options within 30 days, as long as you submit the complete application more than 37 days before a foreclosure sale. Also, you may generally appeal a loan modification denial so long as the servicer received the complete loss mitigation application 90 or more days prior to a scheduled foreclosure sale. Remember, the servicer is required to review you for a loss mitigation option only once, unless you bring the loan current after submitting your complete application.
If you have questions about the foreclosure process in your state or about the laws discussed in this article, consider talking to a foreclosure attorney. If you want to learn about different loss mitigation options or you need help with your loss mitigation application, consider contacting a HUD-approved housing counselor.
by admin | Nov 7, 2019 | Getting Help, Pro Help, Tips & Tricks
If you’re facing a foreclosure, be on the lookout for foreclosure rescue companies—specifically, mortgage modification companies—that falsely claim they can help you save your home.
If you’re a homeowner struggling to make your mortgage payments and facing a possible foreclosure, a scammer might try to contact you. Scammer people and companies say that they help homeowners save their home—usually through a mortgage modification—but often leave homeowners in worse shape than before.
Mortgage Modification Scams
Borrowers who’re struggling to make their mortgage payments might have a number of options to get caught up on the payments, including a modification, forbearance agreement, or repayment plan. You can apply for any of these options, including a modification, on your own without paying for assistance. But scammers might send you mailings trying to convince you that you’re better off hiring their company to help you with the process. (To learn what to do—and what not do—in the modification process, read Do’s and Don’ts for Getting a Loan Modification.)
Solicitations and mailings that you get from a modification company tend to look official, even though they aren’t. The name of the company might sound like the government has endorsed the program or the mailing might refer to official U.S. government programs. Typically, scammer mailings claim you can “Stop foreclosure now!” or “Over 90% of our customers get a loan modification.” These statements are ploys to get you to call the company. Once you do, the main goal of a scammer modification company is to separate you from your money by getting you to pay for the company to—supposedly—help you get a modification.
Forensic Loan Audits and Securitization Audits
A modification company might try to convince you to pay for a “forensic loan audit” or a “securitization audit” to improve your chances of getting a mortgage modification.
What’s a Forensic Loan Audit?
In a forensic loan audit, in theory, a loan auditor reviews paperwork from when you took out your mortgage to see if the lender complied with the law. If the audit reveals legal violations, you can supposedly then use the results to strong-arm the lender into giving you a modification. But the way most companies conduct the audit is that a processor enters your information into a compliance software program, and the program prepares a very basic report. In most cases, no errors or only minor errors are found. The sales person might say that the results of such an audit will force the servicer into giving you a modification, but this is rarely true.
What’s a Securitization Audit?
In a process called securitization, multiple loans with similar characteristics are pooled and then sold in the secondary market, often to a trust. A securitization audit will supposedly reveal whether your loan was securitized and, if so, whether the securitization was done correctly. But securitization audit reports usually just give you publicly available information and make unsupported conclusions of law that aren’t useful when trying to get your loan modified.
Modification Companies: High Fees for Little or No Services
Most foreclosure scammers, including modification companies, exploit a homeowner’s trust and desperate situation by:
- charging very high fees for services the homeowner could easily do without assistance, like sending in documentation to the servicer
- charging money for certain services and then not doing anything to earn the fees, or
- taking steps that actually hurt the homeowner, like missing deadlines or allowing a foreclosure sale to happen.
There’s nothing that a modification company can do that you can’t do yourself. In fact, the company might even hurt your chances of getting a modification, like if it:
- neglects to send in your paperwork to the servicer (the company you make your payments to, which also handles modification applications)
- sends the wrong documents to the servicer, or
- fails to return the servicer’s phone calls.
By the time you realize the company is just running a scam, there might not be enough time to reinstate the loan, work out an alternative to foreclosure, sell the home, or find effective assistance. In almost all cases, you’re better off applying for a modification directly with the servicer yourself or—if you find the servicer is unhelpful or is dual tracking your application—hiring a reputable attorney to help you.
Some States Have Laws to Prevent Foreclosure Rescue Scams
To protect homeowners in financial difficulty from losing their homes to foreclosure rescue scams, the Florida legislature enacted the Foreclosure Rescue Fraud Prevention Act. This law imposes tight restrictions on anyone offering services purporting to help you save your residential property from foreclosure. New Jersey also has a law designed to prevent foreclosure consultants from taking advantage of distressed homeowners.
Tips to Help You Avoid Becoming the Victim of a Modification Scam
Here’s how you can make sure that you don’t become a victim of a modification scam.
- Don’t pay upfront fees. If a modification company demands a large upfront fee from you, beware. Many states have laws prohibiting modification companies from collecting money before performing services, as well as other restrictions on foreclosure rescue activities.
- Don’t pay a modification company rather than your servicer. Sometimes, modification companies advise people to pay the company’s fee instead of making their mortgage payments. This is a red flag. The company might take your money, fail to get you a modification (or not even try), and then you’ll be even further behind on your payments.
- Don’t ignore your servicer or lender. Modification companies often tell people to stop communicating with their servicer and let the company do all negotiating. But that’s not a good idea. You should continue to talk (and listen) to your loan servicer. There’s no magic trick or secret skills involved in “negotiating” a modification. You submit an application and the servicer will let you know if you qualify. Plus, if you keep the lines of communication open, you might learn about a workout option you hadn’t previously considered.
- Do work with a HUD-approved housing counselor. If you need help working out a modification, you can get free help from a HUD-approved housing counseling agency.
Reporting Scams
If you suspect you’re a victim of a modification scam, contact:
- the Federal Trade Commission (877-FTC-HELP)
- your state Attorney General’s Office, and/or
- your local Better Business Bureau.
By reporting a modification or other foreclosure rescue scheme, you might be able to help someone else avoid becoming a victim.
by admin | Nov 7, 2019 | Getting Help, Tips & Tricks
Learn about common mistakes and errors that happen in the mortgage servicing industry.
Mortgage servicers collect and process payments from homeowners, as well as handle loss mitigation applications and foreclosures for defaulted loans. Unfortunately, servicers sometimes make errors when it comes to managing homeowners’ accounts.
Common Errors in the Mortgage Servicing Industry
Servicers sometimes engage in harmful servicing practices that can cause a borrower to default on the loan or otherwise lead to foreclosure. Below are some common ones.
Misapplication of Payments or Inaccurate Accounting
One of the duties of a servicer is to collect and process payments from the borrower. But in some cases, a servicer might:
- improperly apply funds (in violation of the terms in the mortgage or deed of trust)
- ignore a grace period, or
- fail to credit funds to the correct account.
Example. Let’s say a borrower sends in a proper monthly payment of $1,200, but the servicer incorrectly records the payment as $200 and places this amount in a suspense account. (Servicers often use suspense accounts when partial payments are received from a borrower.) The servicer then reports the payment as late to the credit reporting agencies. The servicer’s actions could affect the homeowner’s credit score, even if the mistake is eventually corrected.
The prompt crediting rule. Under federal mortgage servicing rules, the servicer must credit your payment to the account on the day it receives the payment. This is called the prompt crediting rule. But there are a few exceptions to this rule. The servicer doesn’t have to apply the funds to the account on the day the payment comes in if any of the following are true.
- The servicer doesn’t charge you anything—like a late fee, additional interest, or any similar penalty—due to the delay.
- The servicer doesn’t report negative information to a consumer reporting agency.
- You didn’t follow the servicer’s written instructions on how to make your payment. Payments that don’t comply with the servicer’s specific instructions must be credited within five days of receipt.
- You actually made a partial payment. (A partial payment occurs when you pay less than the full amount due, including principal, interest, and escrow, if applicable.)
Partial payments and suspense accounts. The servicer may place a partial payment into a suspense account rather than applying it to your account. If the servicer places your payment into a suspense account, it must let you know on your next monthly statement (called a “periodic statement”) that it has decided to hold the funds in suspense rather than applying them to your account. Once you make another payment and there are enough funds in the suspense account to cover a full payment—including principal, interest, and any applicable escrow amounts—the servicer must then apply the funds to the account.
Charging Unreasonable Fees
Loan contracts generally allow a servicer to charge fees under certain circumstances, like when the borrower is late on a payment or is in foreclosure. A few examples of these types of fees are:
- late fees
- inspection fees
- foreclosure costs, and
- other default-related fees.
But servicers sometimes charge excessive fees or incorrect amounts to the account, which unfairly increases the total balance owed by the borrower. (Learn more in Challenging Late & Other Fees in Foreclosure.)
Improperly Force-Placing Insurance
Most mortgages and deeds of trust require homeowners to maintain hazard insurance coverage on their property. The property owner will generally purchase a homeowners’ policy to meet this requirement. But if the homeowner lets the coverage lapse, the servicer can obtain insurance coverage at the homeowner’s expense. This is called “force-placed” or “lender-placed” insurance. Usually, the servicer adds the cost of the force-placed insurance to the loan payment.
Sometimes, a servicer force-places insurance coverage even though the borrower already had other coverage in place. Because force-placed insurance is expensive, these charges can increase the monthly payment by a large amount. As a result, a homeowner who is already behind in payments or is facing financial difficulties might go into foreclosure when it becomes even more difficult to keep up with the monthly payments.
Dual Tracking
Dual tracking occurs when the servicer proceeds with foreclosure while simultaneously working with the borrower on a loan modification. With dual tracking, the foreclosure might be completed even though the modification application is still pending.
Efforts have been made to address and correct this problem: Federal law restricts dual tracking and some states, like California and Colorado, have laws that prohibit dual tracking.
Failing to Make Appropriate Escrow Disbursements
Escrow accounts are established to ensure that real estate taxes and homeowners’ insurance get paid. Along with the monthly mortgage payment for principal and interest, the servicer collects funds from the borrower that will be used to make payments for these expenses on behalf of the borrower. But, in some cases, the servicer neglects to make the tax or insurance payment.
Consequently, a homeowner could face penalties from the taxing authority (and, in a worst-case scenario, a tax foreclosure) or face difficulties with uninsured property damage. Additionally, the servicer might charge a late fee imposed by the taxing authority or reinstatement fee imposed by the insurance company to the borrower’s account. These fees could possibly lead to an escrow shortage, which in turn would increase the borrower’s monthly payments.
by admin | Nov 7, 2019 | Pro Help, Tips & Tricks
Loan modifications, forbearance plans, and repayment plans can help you avoid foreclosure if you are struggling with your mortgage. Learn more.
By Amy Loftsgordon, Attorney
Loan modifications, forbearance agreements, and repayment plans are different ways that borrowers can avoid foreclosure. Read on to learn the difference between these options and how they can help you if you’re having trouble making your mortgage payments.
Loan Modifications
A loan modification is a permanent restructuring of the mortgage where one or more of the terms of a borrower’s loan are changed to provide a more affordable payment. With a loan modification, the loan owner (“lender”) might agree to do one of more of the following to reduce your monthly payment:
- reduce the interest rate
- convert from a variable interest rate to a fixed interest rate, or
- extend of the length of the term of the loan.
Generally, to be eligible for a loan modification, you must:
- show that you can’t make your current mortgage payment due to a financial hardship
- complete a trial period to demonstrate you can afford the new monthly amount, and
- provide all required documentation to the lender for evaluation.
Required documentation will likely include:
- a financial statement
- proof of income
- most recent tax returns
- bank statements, and
- a hardship statement.
Many different loan modification programs are available, including proprietary (in-house) loan modifications, as well as the Fannie Mae and Freddie Mac Flex Modification program.
If you’re currently unable to afford your mortgage payment, and won’t be able to in the near future, a loan modification might be the ideal option to help you avoid foreclosure. (Read about how to get a loan modification. Also, be sure to learn the do’s and don’ts when trying to get a modification.)
Forbearance Agreements
While a loan modification agreement is a permanent solution to unaffordable monthly payments, a forbearance agreement provides short-term relief for borrowers.
With a forbearance agreement, the lender agrees to reduce or suspend mortgage payments for a certain period of time and not to initiate a foreclosure during the forbearance period. In exchange, the borrower must resume the full payment at the end of the forbearance period, plus pay an additional amount to get current on the missed payments, including principal, interest, taxes, and insurance. The specific terms of a forbearance agreement will vary from lender to lender.
If a temporary hardship causes you to fall behind in your mortgage payments, a forbearance agreement might allow you to avoid foreclosure until your situation gets better. In some cases, the lender might be able to extend the forbearance period if your hardship is not resolved by the end of the forbearance period to accommodate your situation.
In forbearance agreement, unlike a repayment plan, the lender agrees in advance for you to miss or reduce your payments for a set period of time.
Repayment Plans
If you’ve missed some of your mortgage payments due to a temporary hardship, a repayment plan may provide a way to catch up once your finances are back in order. A repayment plan is an agreement to spread the past due amount over a specific period of time.
Here’s how a repayment plan works:
- The lender spreads your overdue amount over a certain number of months.
- During the repayment period, a portion of the overdue amount is added to each of your regular mortgage payments.
- At the end of the repayment period, you’ll be current on your mortgage payments and resume paying your normal monthly payment amount.
This option lets you pay off the delinquency over a period of time. The length of a repayment plan will vary depending on the amount past due and on how much you can afford to pay each month, among other things. A three- to six-month repayment period is typical.
by admin | Nov 6, 2019 | Pro Help, Tips & Tricks
Foreclosure can be an intimidating and scary experience. The stress of potentially losing your home can drive you to make mistakes, either by doing the wrong thing or failing to act at all.
Because your actions are vitally important if you want to keep your home—or at least get through the process with as little anxiety as possible—it’s essential that you to learn the do’s and don’ts when facing a foreclosure:
Do:
- Contact your mortgage servicer. As soon as you think you’re going to have trouble making your monthly payment (or shortly after you fall behind), call your servicer. You might be able to work out a forbearance agreement or a repayment plan.
- Contact a HUD-approved housing counselor for assistance. If you want to apply for a foreclosure alternative—like a loan modification, short sale, or deed in lieu of foreclosure—a HUD-approved housing counselor can tell you more about these options, evaluate your financial situation, and help you deal with your servicer.
- Find out how foreclosure works. Depending on state law and your circumstances, your foreclosure could be judicial or nonjudicial. You should learn each step in the foreclosure process so you aren’t caught off guard at any point. Also, find out about federal laws and state laws that can protect you while you’re in foreclosure.
- Make a record of all your communications with your servicer. Keep track of when you call, who you spoke to, and what you talked about. You might need this information later on to help you fight the foreclosure. Also, keep a folder with all correspondence from the lender, servicer, court, or foreclosure trustee. This way, you’ll have a good idea about the status of your case. And, you might have a defense to the foreclosure if you don’t get certain documents.
- Participate in foreclosure mediation, if your state, county, or city, offers it. Foreclosure mediation brings the borrower and lender (or its representative) to the table, along with a neutral mediator, with the goal of working out a way to resolve the delinquency. One study showed that homeowners who participate in mediation are 1.7 times more likely to avoid foreclosure than those who don’t.
- Find out if your state has a Hardest Hit Fund program. Hardest Hit Fund programs offer financial assistance to homeowners. You might qualify for money to get caught up on the loan or pay future mortgage payments, for example.
- Avoid foreclosure rescue scams. Be wary of letters and phone calls from for-profit companies—especially companies offering to help you get a loan modification. While these companies’ letters look official and their sales pitch might sound good, companies that offer to stop the foreclosure for a fee are often scammers. (Learn about foreclosure rescue scams to avoid.)
Don’t:
- Ignore phone calls or letters from your servicer. Calls and letters from your servicer will likely explain any options you have to avoid a foreclosure and how to apply for those options.
- Ignore letters from the court or a foreclosure trustee. Correspondence from the court or a trustee will contain foreclosure information, including important dates—like the sale date—and details about your rights during the foreclosure.
- Assume the servicer is always correct. Servicers are well-known for making mistakes that violate the law when processing foreclosures. Again, you should understand the specifics of both federal and state foreclosure laws and procedures. If the servicer messes up, you might have a defense to the foreclosure.
- Wait until the foreclosure is almost over to try to save your home. You’ll have more options if you address the problem early on. The longer you wait and the further you fall behind in payments, the fewer options you’ll have.
- Pay upfront fees (or fees for help that you can get for free). If a foreclosure rescue company asks for a hefty upfront fee from you, beware. Many states have laws prohibiting companies from collecting money before performing foreclosure services, as well as other restrictions on foreclosure rescue activities. You also shouldn’t pay a fee to a private company for housing counseling (HUD-approved housing counselors will help you without charge) or to help you apply to a Hardest Hit Fund program. You can easily apply for Hardest Hit Fund assistance on your own.
- Make your mortgage payments to anyone other than your mortgage servicer. Foreclosure rescue companies sometimes say you should pay them instead of your servicer. But this is usually a really bad idea. The company might take your money, fail to stop the foreclosure (or not even try), and then you’ll be even further behind on your payments.
- Move out early. If you abandon the home, you’ll miss out on the chance to stay there for free during the foreclosure. Also, in order to qualify for assistance, homeowners usually have to be living in their home. Another thing to keep in mind is that you’re still responsible for the property until the foreclosure ends, even if you aren’t living there. You don’t want to become the victim of a zombie foreclosure after moving out early. (Learn when you have to leave your home when it’s in foreclosure.)
