- What to Do When It Becomes Difficult to Pay Your Mortgage
- Rising Interest Rates and the Mortgage Crunch and What It May Mean to You
- What Happens to Homeowners Holding Interest-Only Mortgages When Interest Rates Rise
- Mortgage Counseling If You're Having Trouble Paying Your Mortgage
- Refinancing Your Mortgage as an Option to Hold onto Your Home
- The FHA Secure Mortgage Loan Refinancing Program: What Is It and Could It Help You?
- Preserving the Value of Your Home and Community When the Housing Market Changes
- Help for Subprime Mortgage Holders
- Distressed Homeowners May Get Foreclosure Postponement Help from Project Lifeline
- Who Will Be Helped Under the Making Home More Affordable Program
- What Every Homebuyer Needs to Know Before Agreeing to a Mortgage
- What the Housing Recovery Bill Could Mean for You
- Short Sales: What They Are and Why a Homeowner Might Pursue One
- Housing Resources for Distressed Homeowners in 2011
Mortgage Counseling If You're Having Trouble Paying Your Mortgage
If you are having difficulty making your monthly mortgage payment or even facing foreclosure you cannot afford to wait and hope that you can resolve the issue later. If you are behind on your mortgage you can be faced with foreclosure, and sooner than you may realize. Your immediate first step should be to contact your lender to discuss your situation and see what options may be available to help you stay current on your loan and stay in your home. However if you are nervous about approaching your lender or would like additional assistance you may want to consider working with a mortgage counselor in your area. Mortgage counselors are helping thousands of homeowners nationwide determine how to pay their mortgage and stay in their home.
Mortgage counselors can help you begin working your way out of your current mortgage concerns or crisis by:
- identifying the cause of your mortgage payment difficulty
- creating a realistic budget
- setting financial priorities
- determining next steps and options for you to avoid foreclosure and meet your mortgage obligations
- working with your lender to develop a plan that will enable you to stay in and keep your home
- avoiding predatory lenders and scams that could potentially cause you to lose your home.
There are both nonprofit and for-profit companies that advertise and provide mortgage counseling. These organizations typically offer a wide array of services including debt consolidation, budget counseling, credit counseling and bankruptcy counseling, as well as mortgage or housing counseling help for people who are behind on their mortgage payments and/or are in danger of defaulting and going into foreclosure.
All organizations providing mortgage counseling are not alike. Because credit and mortgage counseling is not a highly-regulated industry it’s important to know what to look for before choosing an organization to work with.
Finding a Mortgage Counseling Organization
You should look for a housing counseling agency approved by the U.S. Department of Housing and Urban Development (HUD). HUD-approved housing counseling agencies have information on both federal and local services and assistance for homeowners facing financial crises, as well as support from private or community organizations. Access the list of U.S. Department of Housing and Urban Development's list of (HUD)-approved counselors. You may see several organizations in your area that are HUD-approved housing counselors. Some organizations may specialize and only provide housing-related counseling (for first-time homebuyers, homeowners facing mortgage difficulties, etc.) while others may provide an array of counseling services related to a broad spectrum of financial topics including how to manage or consolidate credit card debt, pre-bankruptcy counseling, etc.
Check to see which organizations on the HUD list of approved counseling agencies:
- offer the services you need
- provide services in the language you primarily speak
- are located in an area that you could reach my car or public transportation
If you're unclear about one of those three topics call the office and ask or visit their website.
Once you have found a potential counselor, you should do two things:
- check to see if it has had any complaints filed against it with your state Attorney General's office or the Better Business Bureau, and then
- call the offices and either talk with a staff member by phone or set up a time to meet in person.
How to Know if an Organization is Legitimate
Anytime you use the services of a counseling organization you should do your homework to make sure it's reputable. While all HUD approved organizations have had to meet criteria established by HUD to be approved, it's still worth asking a few questions to be sure of whom you're working with. It is especially important if you decide to talk and possibly work with an organization offering mortgage counseling that is not on HUD's approved list of housing/mortgage counselors. To make sure you are using a reputable organization ask the following questions:
- Are you a certified 501(c)(3) nonprofit organization? What is your tax ID number? It is preferable to work with a reputable, accredited nonprofit agency. If you have any suspicions about an agency's tax-status (meaning whether or not they are nonprofit, and therefore tax-exempt), you can check their tax ID number out with your state attorney general's office or through nonprofit rating organizations such as Guidestar.org.
- What professional organizations/associations are you accredited by or affiliated with? The National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) are the largest networks of certified credit counseling agencies nationwide and many organizations offering mortgage counseling belong to one or the other. Member agencies belonging to these organizations are put through a rigorous accreditation process to verify their financial accountability, their commitment to clients and their effectiveness in providing services.
- How are your counselors trained? What education or background do you require them to have prior to employment? Are they HUD-accredited housing counselors?
- What fees do you charge? Nonprofit agencies will offer at least the initial meeting for free and then will list a typically reasonable list of fees for services. BE SURE to get in writing what services an organization provides (whether it is a nonprofit or for-profit firm), what the fees are being used to cover and what recourse you have if you want to cancel their services.
- How long have you been in existence and how many clients have you served?
- Do you have a list of references/clients that I could contact to ask about their experience with your organization?
- How are your employees paid? Do they receive a commission for "selling" me certain services or if I make a contribution to your agency? Some fraudulent organizations are fronts for unscrupulous credit card companies that will attempt to steer clients to open additional lines of credit (often at much higher interest rates) with their parent company's credit cards. What you're looking for is an organization that has salaried, well-trained, certified professional counselors and NOT salespeople paid on commission.
- Are your services confidential? The answer should always be yes. Firms should not be renting, selling or sharing your personal financial information to any other firms.
- Can you provide me with some written material on your organization?
- Can I have a written contract for your services? The contract should outline what specific services the organization will provide in return for the stated fee.
- Will I be assigned to a specific counselor or will I work with more than one person on your staff?
- Who can I contact if I have questions outside of the counseling sessions?
- Who sits on your Board of Directors? Could you send me a copy of your most recent annual report? Having an independent Board of Directors and making public copies of their financial statements are two ways that you can verify an agency's commitment to accountability and transparency.
Unfortunately when the economy tightens and credit becomes more difficult to access, predatory lenders and fraudulent companies take advantage of unsuspecting, and often worried, homeowners promising to resolve their problems quickly. You may notice, or may have even been contacted by, for-profit companies that promise to negotiate a loan work-out with your lender for a steep fee. Even if these are legitimate businesses they are charging a high price for information and services that a HUD-approved housing counselor will provide for free. And if a company claims that it can stop your foreclosure immediately be very wary. They often offer to “act on your behalf” if you will simply sign a document – a document which in many cases involves you (without being aware of it), signing over the title, or ownership, of your home to that company and now you become a renter in your own home. You should never sign a legal document without taking time to ensure that you understand all the details of the contract and getting advice from an experienced, trustworthy attorney and/or a HUD-approved housing counselor. If you are concerned that you may be the victim of mortgage counseling fraud contact your state attorney general’s office.
Options You May Be Offered
When working with a mortgage or housing counselor, you may be offered one or more options including:
- Special forbearance - your lender may be able to arrange a new repayment plan based on your current financial situation, and temporarily reduce or suspend your payments.
- Mortgage modification - you may qualify to refinance your debt and/or extend the term of your mortgage loan.
- Partial claim - with this option you may be able to obtain an interest-free loan from HUD to bring you up to date on your mortgage payments. To qualify your loan must be at least 4 months and no more than 12 months delinquent; your mortgage cannot be currently in foreclosure; and you are able to begin making full mortgage payments.
- Pre-foreclosure sale - if you are at least 2 months delinquent on your mortgage payments, your lender may be willing to put foreclosure proceedings on hold while you try to sell your home in a "pre-foreclosure sale." This option allows you time to try and sell your property and then pay off an agreed-upon percentage of your existing mortgage debt (as determined by your lender) through the proceeds from the home sale. This process can help you avoid foreclosure which can have a serious negative impact on your credit rating and your ability to qualify for loans and credit in the future.
- Deed-in-lieu of foreclosure - with this option you may be able to voluntarily "give back" your property to your lender. It won't save your home but it could help you to be in a better position to obtain another mortgage in the future. You may qualify if you are in default and don't qualify for any of the aforementioned options; if you have failed to sell your home prior to foreclosure, and if you don't have another FHA or VA mortgage in default.
Working with a HUD-approved, reputable housing or mortgage counseling organization can help provide you with the tools, resources and support you may need to stay in your home, get current on your mortgage and avoid foreclosure. Free phone counseling by HUD-approved counselors is available 24 hours a day, 7 days a week through the 888-995-HOPE hotline. The hotline's foreclosure counselors listen to the homeowner's situation, and then offer a customized workout plan. If more counseling or contact with the lender is needed, the counselors will link callers to their lenders, to local NeighborWorks® organizations and to other nonprofit organizations for specific help. You can also find information on U.S. Department of Justice-approved credit counselors who may be able to help you learn and consider various options to facing foreclosure or filing for bankruptcy, depending on your financial situation.