If you're experiencing financial hardship, keeping up with mortgage payments can quickly become difficult or even impossible. Foreclosure is a stressful situation, but there are many free resources available for homeowners facing foreclosure. This article discusses some of those resources and things to think about when you’re looking for help with a foreclosure.
Written by Attorney Thomas J. Pearson.
Updated June 5, 2021
If you're experiencing financial hardship, keeping up with mortgage payments can quickly become difficult or even impossible. Foreclosure is a stressful situation, but there are many free resources available for homeowners facing foreclosure. This article discusses some of those resources and things to think about when you’re looking for help with a foreclosure. You’ll learn about government programs, deciding to hire an attorney, common scams, and more.
How The Government Can Help With Your Foreclosure
Federal, state, and local governments offer several programs to help individuals avoid foreclosure. For individuals dealing with a mortgage foreclosure, Making Home Affordable (MHA) should be the first program to contact. It’s a federal program that assists individuals in finding the best foreclosure assistance available. The program connects individuals with a counselor approved by the U.S. Department of Housing and Urban Development (HUD). To learn more about and take advantage of HUD's program, you should start by visiting the MHA website.
The foreclosure prevention counselors available through MHA help individuals find the right government programs to avoid foreclosure, then guide individuals through those programs. Counselors are available all day and night, every day. Free counseling is available for individuals facing foreclosure. Making Home Affordable is an excellent starting point for people facing foreclosure.
Making Home Affordable and HUD-approved counseling agencies are great resources at any time in the foreclosure process. But, if you’re already in court for a foreclosure, you should ask the help desk at your local courthouse to find any other special assistance available.
Currently, some homeowners can take advantage of programs through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Passed in response to the Covid-19 pandemic, the CARES Act offers assistance for households with federally backed mortgages. Federally backed mortgages include mortgages backed by Fannie Mae, Freddie Mac, the U.S. Department of Agriculture (USDA), the Federal Housing Administration (FHA), the Department of Housing and Urban Development (HUD), and the Department of Veterans Affairs (VA). Borrowers looking to use these CARES Act programs must first contact their mortgage lender to do so.
Your mortgage documents might show that your mortgage is backed by the federal government. But if you’re not sure if your mortgage is backed in this way, you should contact your mortgage servicer and ask. If you’re not sure who your mortgage servicer is, you can use HUD’s search tool to find out. You can also use search tools from Fannie Mae and Freddie Mac to see if your mortgage is backed by one of those two organizations.
If your mortgage is federally backed, you can request a forbearance, which allows you to stop making payments for a period of time with no penalty. Forbearance does not “cancel” those payments. You’ll have to pay the money back once forbearance ends.
The CARES Act mortgage programs can also help borrowers minimize late fees and avoid negative credit reporting. If you’re interested in these CARES Act benefits, you should contact your mortgage lender and discuss what benefits are available to you.
How A Private Attorney Or Nonprofit Can Help With Your Foreclosure
Foreclosure is a court process, so it’s often a good idea to speak with an attorney to learn more about your foreclosure situation. You can hire a private attorney to take your case. If you do hire an attorney, you should try to compare different attorneys to make an informed decision about getting the best representation. Many states also have non-profit organizations that represent individuals going through foreclosure. To find an organization that provides such services, you can ask your local court for resources on legal aid and pro bono representation.
Another tool that can help you deal with a foreclosure is filing for bankruptcy. Sometimes, filing for bankruptcy can allow homeowners to avoid a foreclosure completely, but not in all cases. Bankruptcy can also give you more time to figure out what to do with your home. If you’re going through a foreclosure and want to explore bankruptcy, talk to a private attorney to find out what options make the most sense for you.
You should be very careful to avoid scams if you’re looking for any kind of assistance with your foreclosure. Too many con artists try to take advantage of individuals going through hard times. If you’re hiring a private attorney, make sure that the attorney is licensed in your state. You can check attorney licensing by asking the attorney to show their bar license materials and checking with your state bar association.
Similarly, you should only work with housing counselors who are HUD-certified. You can do this by checking HUD’s database of certified counselors. Foreclosure counseling scammers often demand that you pay before they begin their work. You should never pay a foreclosure counselor upfront. Common scams promise things like “loan modification services,” “mortgage audit services,” “foreclosure audit services,” or “securitization audit services.” You can modify your loan by contacting your loan servicer, without a counselor.
Many scammers also promise to pay your mortgage and allow you to stay as a renter if you sign over your deed to them. You should never sign over the deed to anyone. Also make sure to pay your mortgage directly to your loan servicer and nobody else.
If you believe you’re being scammed, you can report the company to the Federal Trade Commission (FTC).
Homeownership can be a great experience but avoiding foreclosure can sometimes be a challenge. Free and quality foreclosure help is out there, through housing counseling agencies, mortgage assistance programs, and other types of mortgage help. You should take advantage of those resources as soon as you realize that you’re unable to make your mortgage payments. Watch out for scammers who seek to steal your money or charge you for something you can do yourself. If they promise something that seems too good to be true, it probably is.