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How to Avoid Foreclosure

If you’re having trouble paying your mortgage, the most important thing you can do is take action. Call your mortgage servicer – the company that receives your monthly mortgage payments – today. Foreclosure can usually be avoided.

Talk to a housing counselor at no cost to you

A HUD-approved housing counselor can help you prepare for a call with your mortgage servicer and learn more about which assistance options are best for you.

Call 1-855-HERE2HELP, (855-437-3243855-437-3243), or schedule an appointment

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In order to prevent foreclosure, it’s important to understand how it works and the steps you can take to navigate it if it becomes a reality.

What is foreclosure?

Foreclosure is the legal process where your mortgage company obtains ownership of your home (i.e., repossesses the property).

It happens when the homeowner fails to make payments and defaults or violates their mortgage loan terms.

There are two main types of foreclosure:

  • Judicial — supervised by a court with formal legal proceedings (civil lawsuit)

  • Nonjudicial — non-court supervised

Foreclosure processes

In both judicial and nonjudicial foreclosures, the homeowner receives a legal notice providing details about the amount owed. The legal foreclosure notice is then published in the local newspaper. Finally, the house is sold at a public auction.

Judicial foreclosures will be served with a legal notice of the pending action. The court will approve or set the foreclosure date and sale.

The specific process and timing of a foreclosure can vary by state, depending on local laws and other factors. However, your mortgage company can begin preparing the default notice as early as 60 days after the first missed payment.

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Foreclosure consequences

Foreclosure has potentially long-lasting repercussions, which may include:

  • Forfeiting mortgage access — you may have to wait at least seven years to receive another Fannie Mae mortgage for a new home purchase.
  • Paying off your mortgage — you may still be responsible for paying off your mortgage after the foreclosure sale.
  • Losing additional financial assistance — you may no longer have access to relocation assistance, leasing opportunities, etc.
  • Eviction — you will lose your home and may lose any equity that you may have established.
  • Credit damage — there may be considerable impact on your ability to qualify for new housing, credit, and even potential employment.

Time to take action

Most importantly, a foreclosure can usually be avoided even if you’ve already received a legal notice. Here are three steps to help you prevent foreclosure:

You’ll need:

  • Mortgage statements — including information on a second mortgage (if applicable).
  • Other monthly debt payments — like car or student loans or credit card payments.
  • Income details — including paystubs and income tax returns.

When you call your mortgage servicer, you’ll need to:

  • Describe your current hardship.
  • Explain why you are having trouble making your mortgage payment.
  • Explain if this is a short- or long-term problem.

If you want to prepare for your conversation with your mortgage servicer, you can contact a HUD-approved housing counselor.

The best way to prevent foreclosure is to talk to your mortgage servicer as soon as you notice you may fall behind on payments. Remember, they want to help you avoid foreclosure.

Foreclosure is not the end

If foreclosure is imminent, you may still be able to leave your home without experiencing the typical consequences mentioned above.

Here are your options to keep foreclosure from showing up on your credit history:

  • Sell your home with equity — this is a viable option for those whose home is worth more than the amount owed on the mortgage.
  • Complete a short sale — sell your home for less than the balance remaining on your mortgage.
  • Apply for Mortgage Release™ — also known as a deed-in-lieu of foreclosure, this transfers property ownership to the mortgage owner in exchange for a release from your loan and payments.

With these options, you may also qualify for financial relocation assistance to ease your transition to new housing.

Foreclosure Options

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