Foreclosure 101

When does a bank foreclose on a property?

If you fail to make your monthly mortgage payments over a period of time, the lender can foreclose. What this means is that you will lose the title to your property and you can be evicted from your home.

Does a foreclosure affect your credit?

Yes, a foreclosure will affect your credit and your ability to obtain credit in the future. If you let your home go into foreclosure, a notice of foreclosure can remain on your credit bureau file for seven (7) years.

What if I can’t pay my mortgage?

Call your mortgage company immediately. As soon as you realize that you are unable to make your payments, open a dialog with the lender you make payments to and explain your circumstances. The chances of you keeping your home are greater when you are only one to two payments behind.

Many people in financial trouble will wait until the last minute to call their lender. The longer you wait, the chances are greater that you will lose your home. If you cannot make your mortgage payment, don’t wait - call your mortgage company immediately.

Depending on your situation, your lender may be able to provide you with temporary relief. Below are a few of the alternatives to talk about with your mortgage company.

-        Forbearance: is an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period. Lenders may consider forbearance when you can show that funds from a bonus, tax refund, or other source will let you bring the mortgage current at a specific time in the future.

-        Reinstatement: occurs when you pay your mortgage company the total amount you’re behind, in a lump sum, by a specific date. This is often combined with forbearance.

-        Repayment Plan: is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.

-         Loan Modification: is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable. Common loan modifications include;

o       Adding missed payments to the existing loan balance

o       Making an adjustable-rate mortgage into a fixed-rate mortgage

o       Extending the number of years you have to repay

Who can I contact for credit counseling?

Non-profit housing and credit counselors can help you analyze your financial situation. They also can help you organize a budget to pay your mortgage and other monthly expenses without your mortgage company’s direct involvement. These agencies can help you find and take advantage of local services or programs that provide financial, legal, medical or other support.

You can find a credit counseling agency in your local phone book or by contacting the U.S. Department of Housing and Urban Development (HUD) at 800-569-4287. You can find a list of HUD-approved agencies on their website at www.hud.gov.

Should I be concerned about predatory lenders?

Yes. Predatory lenders often target people in financial distress. They try to panic you into high cost mortgages, making financial problems worse and increasing your risk of losing your home. Predatory lenders usually offer loans with:

-        High interest rates

-        Broker fees

-        Unnecessary costs like pre-paid life insurance

-        Unaffordable repayment terms

How can I protect myself from predatory lenders?

-         Be suspicious of anyone who offers you “bargain loans,” whether they mail, fax or e-mail an offer to you, call you on the phone or come to your door.

-         Beware of promises of “No Credit? Bad Credit? No Problem!” and offers that are only “good for a very short time”.

-         Avoid lenders who encourage you to borrow more than you need or more than the value of your home.

-         Beware of terms that change at the last minute or offer next-day approval based on prepayments or up-front fees.

-         Do not sign anything you do not understand. It is your right and duty to ask questions.

-         Beware of phony credit counseling agencies charging high fees for financial counseling services you can get for little or no charge through non-profit agencies. You can find a list of HUD-approved agencies by visiting their website at www.hud.gov.

The Old Saying: Anything that sounds too good to be true usually is! If you suspect a predatory mortgage company is targeting you, call your local office of consumer affairs, the Federal Bureau of Investigation or an approved credit counseling agency.

I hope the above information has been helpful. If you have any further inquiries regarding the foreclosure process, please go to the U.S. Department of Housing and Urban Development website at www.hud.gov.

Yours sincerely,

Rick DeAguiar

P.S. If you're a buyer who is interested in bank-owned/foreclosure properties, please go to the "Buyer Opportunities" section of my website.