How to Get Foreclosure Help from Your Lender
Layoffs, injuries and other sudden changes to your financial situation can impact your ability to make mortgage payments. Unfortunately, consistently paying late or missing payments could put your loan into foreclosure. Before you get to that point, there are a number of steps you can take with your lender to help prevent the loss of your dream home.
Ask for Foreclosure Help
Lenders want their borrowers to make good on issued loans. When borrowers miss payments and foreclosure becomes inevitable, it negatively affects the bank. Banks are not in the business of real estate, and owning your home typically means a fairly substantial financial loss for the bank. They are motivated to offer a variety of programs designed to help those facing foreclosure, as this benefits both you and them. If you are having trouble making your monthly mortgage payments, your first step should be a call to your lender.
Investigate the Possibility of a Forbearance
If your financial situation changed suddenly, your lender may choose to extend your grace period on late payments. When your financial struggle is very temporary, this can help you get back on your feet. If your financial woes may last longer, your lender may choose to allow you to miss up to six payments over the course of two years. This can be invaluable after a layoff or an injury that affects your employment status. If six months is not long enough, even spread out to accommodate partial payments, you may need to move on to the next step.
Restructure your Loan
In the face of a long-term or permanent change to your income, it may be necessary to permanently change the terms of your mortgage. During a restructure, the most likely change is to extend the duration of your mortgage to lower your monthly payment. For example, if you have 25 years left on a 30-year mortgage, you might extend it back up to 30 years. That stretches your balance over an additional five years, lowering your payments by a corresponding amount. You might also need to negotiate a lower interest rate. Restructuring is not always available, but there may be other lending options that will offer assistance.
Refinance for Foreclosure Help
In some very limited circumstances, a refinance loan can help you lower your payments and avoid foreclosure. If interest rates have lowered dramatically and/or your credit has improved, you might refinance to a lower interest rate. The downside is that during a refinance, there are expenses associated with closing the loan. Remember the closing costs you paid when you first bought your home? During a refinance, you might need to pay those all over again. There might also be points on the loan, which would require a significant cash outlay. Refinancing to change your type of loan may be an option, particularly if your original loan was an adjustable rate mortgage or a fixed rate with a very short term. Be very cautious about refinancing. There are many lenders that prey on people who are desperate to avoid foreclosure.
Get HUD Involved in the Negotiations
The U.S. Department of Housing and Urban Development has a whole host of programs designed to offer foreclosure help. Programs like HAMP could reduce your monthly payment by 40 percent or more, based on your new income level. If you are underwater on your mortgage, they have programs for that, too. Also, keep in mind that your lender may need to increase the amount of forbearance offered to you if you are unemployed. New requirements extend the forbearance period to 12 months.
The right combination of government programs and lender services could help you keep your home.
- Contact your lender immediately if you are facing financial difficulties.
- Ask for help.
- A loan restructure could give you crucial financial relief.
- Refinance loans may come with hidden costs.
- HUD may hold the solution to your home loan woes.