What is Foreclosure?
Foreclosure is a legal process in which a person who has made a mortgage in order to borrow money loses his or her rights to the mortgaged property. A mortgage represents security - generally real estate - for money loaned. The borrower retains possession of the property, and foreclosure is affected only if the borrower fails to make payment of the debt at the proper time or fails to meet other obligations specified in the mortgage.
To make a foreclosure, it is usual for the lender to apply to a court for authority to sell the property or to proceed with the sale under a power provided in the mortgage itself. In such instances the term foreclosure is loosely applied to the sale by the lender or holder of the mortgage. Money received from a sale is applied to all debts on the property, including payments due to the mortgagee.
Tips for Avoiding Foreclosure
Are you having trouble keeping up with your mortgage payments? Have you received a notice from your lender asking you to contact them?
- Don't ignore the letters from your lender
- Contact your lender immediately
- Contact a HUD-approved Housing Counseling Agency
- Toll free: (800) 569-4287
- TTY: (800) 877-8339
If you are Unable to Make your Mortgage Payment
Don't Ignore the Problem
The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.
Contact Your Lender as Soon as You Realize That You Have a Problem
Lenders do not want your house. They have options to help borrowers through difficult financial times.
Open & Respond to All Mail from Your Lender
The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
Know Your Mortgage Rights
Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and timeframes in Washington State (every state is different) by contacting the Washington State Department of Financial Institutions.
Understand Foreclosure Prevention Options
Valuable information about foreclosure prevention (also called loss mitigation) options can be found at the Housing and Urban Development website.
Contact a HUD-Approved Housing Counselor
The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance.
Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.
Prioritize Your Spending
After health care, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment.
Look for optional expenses - cable TV, memberships, entertainment - that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.
Use Your Assets
Do you have assets - a second car, jewelry, a whole-life insurance policy - that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income?
Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.
Avoid Foreclosure-Prevention Companies
You don't need to pay fees for foreclosure-prevention help - use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender.
While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD-approved housing counselor will provide free if you contact them.
Don't Lose Your House to Foreclosure Recovery Scams!
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional or a HUD approved housing counselor.
FHA Resources for Foreclosure
Call the Federal Housing Authority (FHA) at (800) CALL-FHA. There you will have the opportunity to learn about foreclosure prevention, legal rights and credit counseling, among other topics.
Take advantage of the recently announced FHASecure program. This new program allows eligible homeowners to refinance into a secure, fixed-rate FHA loan even if they are in default.
A new partnership between mortgage companies and non-profit housing counselors called Hope Now is available. Their mission is simple: reach out to homeowners who may be having difficulty paying their mortgages.