Foreclosure on a home is the worst possible option for both the mortgage lender and the homeowner.
Banks do not like foreclosures, for the simple reason that they cost money.
For the homeowner, it means both the loss of the house (and place to live) along with a credit record that has been shredded.
The FHA has several suggestions for homeowners who are delinquent on loans and some options to provide assistance on FHA insured loans.
The first task for a delinquent home owner is to contact the lender, discuss the situation, and provide evidence of the financial difficulties causing the delinquent payments.
Depending on the reason for the late payments the lender may have the ability to help.
Some FHA lenders may consider restructuring the loan or refinancing it to extend its life and thus lower the payments.
If you have suffered some sort of financial setback and are on the road to recovery, you may be considered for this solution.
If you have had a reduction in income and provide proof of that fact, the lender may consider a temporary reduction or suspension of payments.
If you have an FHA loan, your lender may be able to work with you in order to obtain a one-time payment from the FHA insurance pool that will bring your payment schedule current.
For this option to occur, your delinquent status must be at least four months but no more than twelve months.
In addition, you must be prepared to resume the payment schedule as established in the mortgage.
Your lender must file a partial claim with the FHA, which HUD will pay to the lender.
You, the borrower must sign a promissory note to repay HUD. A lien is filed on the property; however the note carries no interest and is due when you pay off the mortgage or when you sell the house.
You may also engage in a ‘pre-foreclosure sale’ by selling the property for less than is owed on the loan.
You will qualify for this option by being at least two months delinquent on the mortgage and by selling the home in three to five months.
If your home loan is already delinquent, chances are that the mortgage servicer has already tacked on additional late and processing fees. These can be upwards of $10,000.