People may face foreclosure for many reasons. Extreme changes in life situations such as death, divorce, prolonged illness and many others--or because they must immediately relocate or have lost their job. Foreclosure can occur when payments become three to four or more months late, depending on the mortgage terms. The most important thing to do if you think you may be having trouble making your payments is to contact your lender, by telephone or at its web site. Your lender has representatives available to discuss your situation in detail and explore your options.
Your lender may offer a variety of foreclosure prevention loans, but they generally boil down to these approaches:
- Special Forbearance Plan – a written agreement allowing borrowers to either suspend or reduce monthly payments for a specified period of time until they are able to make payments to bring the loan current.
- Repayment Plan – a written agreement allowing borrowers to repay their late or unpaid mortgage payments by making a scheduled payment in addition to the regular monthly payment.
- Loan Modification – a change in one or more of the terms of the note in order to bring the loan current by adding the amount owed to the loan balance and/or re-adjusting the balance within the existing remaining term. This will not reduce the total loan balance.
- Short Sale – borrower selling the property and the lender accepting less than total balance of the loan.
- Deed-In-Lieu – borrower voluntarily gives up the title of the home to the lender.
- Military Relief – rights and protections provided under the Servicemembers Civil Relief Act or the California Military Families Financial Relief Act.
More detailed information regarding these options is available from your loan servicer. Prior to contacting your lender, gather loan documents and review them. Having your deed of trust, promissory note, closing escrow statement, and disclosure statements in hand will be beneficial. Seeking help before you miss a payment is also wise when you seek assistance from foreclosure prevention programs outside your bank. Some new programs will turn you away if you have been delinquent even once.
Sources of Foreclosure Prevention Assistance
A good place to begin investigating your options is at the website for the U.S. Department of Housing and Urban Development (HUD). It includes advice on avoiding foreclosure and warnings about foreclosure-related scams, and links to resources in each state. Below is a list of resources with links to agencies that can provide counseling and additional helpful information if you are facing default or foreclosure on your mortgage loan.
HUD-Approved Counseling Agencies
HUD-approved counseling agencies can help you work with your lender to save your homeownership. Agencies include the national NeighborWorks America program, locally represented by the NeighborWorks HomeOwnership Center - Sacramento Region and the Home Loan Counseling Center of Sacramento (SHLCC). Since 1987, the dedicated members and partners of NeighborWorks HomeOwnership Center Sacramento Region (NWHOCSR) have worked with local residents to improve neighborhoods and positively affect the lives of people in our region. NeighborWorks conducts Foreclosure Prevention Workshops presenting clear information to provide a full understanding of the timing, circumstances, and possible actions that can lead to a potential solution. You may also be able to get foreclosure related legal assistance at no cost. Contact NeighborWorks for additional information on the web or phone: (916) 452-5356.
Home Loan Counseling Center of Sacramento
This Center is a private nonprofit housing education and counseling organization which teaches about the steps to and benefits of homeownership. SHLCC also offers a foreclosure prevention program. You will be able to meet with a certified Foreclosure Prevention Counselor who can explain options available to you, help develop a household spending plan, and negotiate with your lender on your behalf. Services are free and confidential. Contact SHLCC for additional information on the web or phone: (916) 646-2005.
This private coalition, staffed with U.S. Department of Housing and Urban Development (HUD)-approved counselors, includes lenders that could come to your aid even if you are already delinquent. Also, HopeNow offers assistance for both subprime and prime borrowers down on their luck. The group includes financial counselors, loan servicers and others from the mortgage industry. The group generally helps you work with your lender for a modification or repayment plan for late payers. A repayment plan allows you to become current and catch up on missed payments. Contact HopeNow for additional information on the web or phone: 1-888-995-HOPE (4673).
National Community Reinvestment Coalition
The National Homeownership Sustainability Fund (NHSF) assists families that hold high-risk mortgages or have experienced a change in financial circumstances that undermines their ability to repay. It also helps senior citizens who have refinanced their homes with high-cost mortgages, including reverse mortgages.
NCRC's Consumer Rescue Fund
This agency works with victims of predatory lending to provide mediation, refinancing or renegotiation of mortgages. Refinancing services are currently available in the state of California. Contact NCRC for additional information on the web or phone: (202) 628-8866.
Neighborhood Assistance Corporation of America
NACA is a national non-profit advocacy and homeownership organization. NACA's Refinance Program offers new loans to eligible homeowners with unaffordable mortgages. NACA's Home Save program gives counseling and financial assistance to eligible homeowners who are at risk of foreclosure. Contact NACA for additional information on the web or phone: (888) 302-NACA.
- American Recovery and Reinvestment Act - Visit www.hud.gov to learn more about the American Recovery and Reinvestment Act of 2009.
- Fannie Mae and Freddie Mac - Two of the nation's largest sources of financing for residential mortgages, dovetail their foreclosure prevention efforts into many of the programs mentioned above. They also offer foreclosure prevention tips and information on their Web sites.
- Servicemembers Civil Relief Act (SCRA) - If you are in the military, you have special relief under the Servicemembers Civil Relief Act (SCRA) to stop the foreclosure. You could also be eligible for a reduction in the interest rate. For more information visit or contact your military unit leader or the legal assistance office at your installation or base.
- California's Consumer Home Mortgage Information - for English, or for Spanish.
- Rural Community Assistance Corp (RCAC) Foreclosure Counseling Agencies
- Clearpoint Credit Counseling Solutions, formerly known as Consumer Credit Counseling - A nonprofit focused on helping low- and moderate-income consumers, Clearpoint keeps its rates affordable. An initial counseling session is free, whether it's by phone, online or at a sit-down session at its Sacramento office. Call (877) 412-2227 for additional information.
- A Homeowner's Guide to Foreclosure in California - This guide is designed to help homeowners understand the options available to them in foreclosure. It describes the foreclosure process, the documents homeowners may expect to receive in foreclosure and highlights some of the important options and considerations home-owners must be aware of when their home is threatened by foreclosure.
- Tips to Avoid Foreclosure - For those in situations that could lead to foreclosure, the U.S. Department of Housing and Urban Development offers some tips to avoid it.
- The Foreclosure Process - For a useful guide to the foreclosure process and California-specific information.
- For information about the Obama administration's programs for refinancing and loan modification, visit Making Home Affordable.