Receiving a Notice of Default from your mortgage lender is a frightening experience, even when you understand how far behind on your payments you are. Rather than going into a full-scale panic, assess your foreclosure options. Ways may exist for you to avoid the dreaded foreclosure auction and keep your home.
Before you receive a default notice
Your proactive efforts to remedy the situation before receiving the default notice from your lender directly affect your foreclosure options. Not every lender begins the foreclosure process at the same time. Some will act as soon as the law allows while others may wait a year to take action. For best results, assume your lender will be quick to action and contact them before you miss your third consecutive payment.
Although your lender may require you to work with the Collections department, be clear that you need to speak with someone in the Loss Mitigation department. This is the group with the power to work out a payment arrangement or loan modification. Both of these are preferable to your other foreclosure options.
Working with your lender
After you receive the default notice, you may still have foreclosure options beyond the loss of your home. Make no mistake about it; your lender wants their money, not your house. Be honest with your mortgage company about why payments are delinquent and what steps you’re taking to correct the situation. Find out if they can add the amount you owe to the principle balance and adjust your payments to compensate for the change in order to bring you current.
Another foreclosure option is to turn over the deed to your property. You will still lose your house, but a foreclosure will not appear on your credit and the lender will not continue pursuing you for the money you owe. Not all lenders will agree to this; however, doing so will save the company a considerable amount of money on attorney’s fees by not continuing the foreclosure.
FHA loan options
When you have an FHA mortgage—one backed by the Federal Housing Administration—special foreclosure options may be available to you. Depending on the exact nature of your financial situation, you may qualify for a loan to bring your mortgage current. This loan does not charge interest and you make no payments. In fact, you take no further action with this loan until you payoff or sell the home.
Always remember that even when none of the alternative foreclosure options work for you, things are not as dark as they may seem. At the end of the day, a house is still just a house. What you do and who you are is what turns any piece of property into a home.
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