How to Stop Foreclosure

Guide Note Responding to early warning signs, contacting the lender at the earliest opportunity, avoiding pitfalls and seeking counsel from legitimate agencies can help homeowners avoid foreclosure. This web page details basic steps on How to Stop Foreclosure.

Table of Contents

• Introduction
• Step 1: Don't Ignore Warning Signs
• Step 2: Contact the Lender ASAP
• Step 3: Know Your Rights
• Step 4: Seek Housing Counseling
• Step 5: Beware of Scams
• Conclusion
• References

Stopping Foreclosure Tips

1. Don't be afraid to open your mail.
2. Contact the lender directly and ASAP.
3. Have financial documents ready when calling the lender.
4. Know foreclosure timelines in your state.
5. Meet face-to-face with a HUD approved housing counselor.
6. Call the foreclosure hotline at 1-888-995-HOPE.
7. Avoid foreclosure rescue companies that require fee.
8. Contact State Attorney General's office, if required.

Disclaimer The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here.

• by Kiran Bharthapudi

Introduction

• According to the Center for Responsible Lending, the number of families in danger of losing their homes reached record highs at the end of the second quarter of 2008. In May, for instance, four times as many families suffered home foreclosures compared to those who received loan modifications on their mortgage.¹ While avoiding foreclosure requires personal responsibility and initiative from the homeowner, it is important to know there is credible and legitimate help out there. If you are looking for foreclosure rescue, this page will help you get started.

Step 1: Don't Ignore Warning Signs

(Creative Commons photo by Jeff Turner)

• When foreclosure begins it's a legal process, which is hard to resolve without some financial or credit damage. So don't ignore early warning signs.

1. If you are unable to pay other monthly bills, barely making minimum payments on your credit cards or relying on credit to pay for day to day expenses, this may soon lead to defaulting mortgage payments and open doors for foreclosure.²
2. Once you miss a payment, or two, the risk of foreclosure becomes real.
   • For every missed payment your credit scores goes down and you're hit by late fees. Unless you become current in your payments within three to five months, in most cases, the lenders legally initiate the foreclosure process.³
3. According to the recent survey by Roper Public Affairs and Media, 86% of delinquent borrowers were contacted by the lender either by phone or letter.⁴ While some homeowners remain in denial, others don't respond due to fear or embarrassment.
   • Open every letter you receive concerning your mortgage.

Step 2: Contact the Lender ASAP

(Creative Commons photo by Jeff Mark)

If you notice any of the warning signs, contact or respond to the lender ASAP. The sooner you call the better your chances of negotiating a successful loan modification.² Even if you have money problems, don't be afraid.

1. Many borrowers believe calling lenders would trigger notifications to collection agencies and hasten foreclosure proceedings. But the converse is true. ⁵
   • Lenders want to help homeowners because foreclosures are also expensive for lenders, investors and private mortgage insurance companies.
2. According to the Roper Public Affairs and Media survey, 57 percent of the nation's late-paying borrowers didn't know their lenders offered resources and alternatives to help them avoid foreclosures.⁴
   • These options work best when you are only two or three months behind in your payments.
3. You can find your lender's contact information on your monthly mortgage billing statement or payment coupon book.
4. The Federal Housing Administration recommends you have the following information ready when you call:⁵
   1. Your loan account number.
   2. A brief explanation of your circumstances.
   3. Recent income documents like pay stubs, Social Security benefit statements, tax returns, etc.

Step 3: Know Your Mortgage Rights

(Creative Commons photo by Joe Crawford)

• Once a lender declares your loan as in default, a foreclosure process may be initiated with the NOTICE OF INTENT TO FORECLOSE.⁶

1. Remember, a foreclosure notice does not necessarily mean you will loose your home.⁶
   • You may still have chance to renegotiate with the lender.
2. Foreclosure laws, procedures and homeowner rights differ from state to state.
   • For instance, in Pennsylvania the lender must send a notice of intent directly to the borrower, if the borrower is 60 days or more behind in his/her mortgage payments.⁷ In New Jersey, the foreclosure notice should be published in at least two local county newspapers.⁸
3. Learn about the foreclosure laws and time frames in your state.^{9 10}
4. You can also contact your local HUD office.¹¹

Step 4: Contact a Legitimate Source for Counseling

(Creative Commons photo by Jo Guldi)

• Several governmental and not-for-profit organizations offer personal counseling services at no cost. A housing counselor will not only explain laws and procedures but also counsel you on available options to save your home and help you in settling loan modifications with your lender. ¹²

1. Check for the U.S. Department of Housing and Urban Development or a HUD approved counselor available in your area.¹³
2. Hope Now, an alliance between counselors, lenders and investors, is another source for foreclosure counseling.¹⁴
   • Call their hotline at 1.888.995.HOPE.
3. You can also contact legitimate not-for-profits like Neighbor Works, The Society for the Preservation of Continued Ownership (SPOCH) and ask for a counselor.^{15 16}
4. For more information on foreclosure prevention resources available in your state, visit the HUD website.¹⁷

Step 5: Beware of Foreclosure Rescue Scams

(Creative Commons photo by I See Modern Britain)

• The increase in foreclosures nationwide has opened doors for scams that promise to rescue homeowners from foreclosure. What these scams do is take your money, ruin your credit history and increase the risk of foreclosures.¹⁸

1. In general, homeowners looking for foreclosure rescue should be wary of companies that offer help, but require a fee.¹⁴
2. In the last year, the Better Business Bureau (BBB) has heard from victims of foreclosure rescue schemes in almost all 50 states.¹⁹
3. Furthermore, states with the highest foreclosure rates—such as Georgia, Colorado and Ohio—have an exceptionally high number of complaints for companies offering foreclosure rescue.
   • To lure homeowners, scam artists use simple slogans like "Stop Foreclosure Now!" or "We Can Save Your Home. Guaranteed. Free Consultation." ²⁰
4. For those looking for foreclosure prevention help, the BBB advises to avoid any business that:²⁰
   1. Guarantees to stop the foreclosure process – no matter what your circumstances.
   2. Instructs you not to contact your lender, lawyer, or credit and housing counselors.
   3. Collects a fee before providing you with any services.
   4. Accepts payment only by cashier's check or wire transfer.
   5. Encourages you to lease your home, so you can buy it back over time.
   6. Tells you to make your mortgage payments directly to the business, rather than your lender.
   7. Tells you to transfer your property deed or title to the business.
5. If you think you were a victim to a foreclosure rescue scam contact your state Attorney General's Office.²⁰
   • To find contact information for your state's Attorney General, check out The National Association of Attorneys General.²¹

Conclusion

• Home foreclosure can be personally and financially devastating. However, you can prevent foreclosure by being proactive and confronting the situation head-on. Contact the lender immediately and directly once you detect any problem paying your mortgage.² Look for governmental and NGO help for housing counseling and avoid foreclosure rescue companies who ask for a fee.¹² Contact the State Attorney General's office if you sense any malpractice.²⁰

References for How To Stop Foreclosure

1. ↑ Center for Responsible Lending: Press Release (July 2008)
2. ↑ ^{2.0 2.1 2.2} Freddie Mac: Tips and Resources for Borrowers (June 2008)
3. ↑ CNNmoney.com: How to avoid Foreclosures (July 2008)
4. ↑ ^{4.0 4.1} Roper Public Affairs and Media: Foreclosure Avoidance Research II (June 2008)
5. ↑ ^{5.0 5.1} Federal Housing Administration:You Can Avoid Foreclosure and Keep Your Home
6. ↑ ^{6.0 6.1} Society for the Preservation of Continued Homeownership: Foreclosure First Aid Kit
7. ↑ Foreclosurelaw.org: Pennsylvania Foreclosure Law Summary
8. ↑ Foreclosurelaw.org: New Jersey Foreclosure Law Summary
9. ↑ Foreclosurelaw.org: Foreclosure Laws By State
10. ↑ RealtyTrac.com: Foreclosure Laws and Procedures By State
11. ↑ U.S. Housing and Urban Development: Local HUD Information
12. ↑ ^{12.0 12.1} U.S. Department of Housing and Urban Development: Tips for Avoiding Foreclosure
13. ↑ U.S. Department of Housing and Urban Development: HUD Approved Housing Counseling Agencies
14. ↑ ^{14.0 14.1} HopeNow.Com: Front Page Alert
15. ↑ Neighbor Works: Neighbor Works
16. ↑ Society for the Preservation of Continued Ownership: SPOCH Home Page
17. ↑ U.S. Department of Housing and Urban Development: Avoiding Foreclosure-Resources in Your State
18. ↑ Office of the Comptroller of Currency: Consumer Advisory Press Release May 2008
19. ↑ Better Business Bureau: Press Release August 2007
20. ↑ ^{20.0 20.1 20.2 20.3} Better Business Bureau: Foreclosure Rescue Scams
21. ↑ National Association of Attorneys General: The Attorneys General