Do I Have to Lose My Home to Foreclosure? - Advice from HUD

Losing the home that you have worked hard to pay off for a period of months or years is painful. Just because you have become 90 days or more delinquent on the mortgage for your residence does not mean that you will definitely lose your home. According to Housing and Urban Development (HUD), there are some other types of relief for people struggling to get caught up on their mortgage payments after the first 3 months. This article briefly discusses the options explained by HUD that benefit borrowers and lenders.

When you become more than 90 days past due on your mortgage, the mortgage lender turns to the process of loss mitigation. This is a fancy term for figuring out how to prevent the foreclosure from happening. It is advantageous but risky for the lender to help you find another option besides foreclosure.

According to HUD, "Industry sources suggest that 70 to 80 percent of all loans at 90-day delinquency can still be reinstated without assistance."Keep in mind that this statistic was reported in fall 2005 before all of the current problems with the mortgage industry.

Above all, you should not lose faith that you can save your home. It is worth exhausting all avenues of relief before giving in to the overwhelming finality of foreclosure.

HUD identifies three options once your home enters the loss mitigation phase to prevent foreclosure.

The first option is the advance claim, whereby the borrower agrees with an insurer to a promissory note for the overdue amount on the loan.

The second option is the forbearance plan, in which the borrower receives a temporary agreement to pay smaller monthly payments. By the time the forbearance plan is approaching the end, the borrower is making higher payments.

The third option is to permanently change the terms of the loan with a different interest rate and perhaps more years to pay off the debt. This option benefits people whose financial situation (such as monthly earnings) is not going to recover.

If your home loan enters the loss mitigation phase, you can look into these options. Remember to seek the services of a HUD-certified counselor. It is easy to be misled by bad advice. For example, HUD cautions against using foreclosure prevention companies and against becoming the victim of a scam in which you unknowingly sign over the deed to your house to an agent who masquerades as someone to represent you during foreclosure proceedings.

Get the facts on foreclosure and make the decision that is best for your family.