Frequently Asked Questions
I am behind on my mortgage payments or fear I may be in the future. What should I do?
If you are having trouble paying your mortgage or have received a foreclosure notice, contact your lender or loan servicer immediately. You may be able to negotiate a new repayment schedule.
Who can help me work with my lender or loan servicer?
A counselor with a housing counseling agency can assess your situation and help you prepare for discussions with your lender or loan servicer. Housing counseling services are usually free. You may contact the U.S. Department of Housing and Urban Development (HUD) for a referral to a housing counselor in your area. Contact HUD at (800) 569-4287.
Should I hire a foreclosure consultant to help me negotiate with my lender or loan servicer?
Contact your lender or loan servicer yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.
There are many fraudulent companies who claim that they can help you save your home. Beware of companies who demand payment up front, request that you transfer the title to your home, tell you not to make payments on your loan, or instruct you to pay someone other than your lender or loan servicer.
It is unlawful for anyone--including attorneys and real estate brokers--to charge an advance fee for modifying your loan. Loan modification firms must tell potential clients they can get the same services for free from government-approved nonprofit mortgage counselors. The firms cannot receive payment until they have performed all services promised in a contract with the borrower.
I paid a company to help negotiate with my lender, but they did not do what they promised. How do I file a complaint?
File a complaint with the California Attorney General's Office.
File a complaint with the Federal Trade Commission.
If your complaint is against a real estate broker, visit the Department of Real Estate website.
If your complaint is against an attorney, visit the State Bar of California website.
You may also wish to consider filing a Small Claims Court action. These are informal courts where disputes are resolved quickly and inexpensively by a judge. You can recover up to $7500 in Small Claims Court. You represent yourself and can request a judgment for monetary damages. Visit the California Courts Self-Help Center for further information.
When I contact my lender or loan servicer, what options are available?
If you have fallen behind on your payments, consider discussing the following foreclosure prevention options with your lender or loan servicer:
Reinstatement: You pay the loan servicer the entire past-due amount, plus any late fees or penalties, by a date you both agree to. This option may be appropriate if your problem is paying your mortgage is temporary.
Repayment plan: Your servicer gives you a fixed amount of time to repay the amount you are behind by adding a portion of what is past due to your regular payment. This option may be appropriate if you've missed a small number of payments.
Forbearance: Your mortgage payments are reduced or suspended for a period you and your servicer agree to. At the end of that time, you resume making your regular payments as well as a lump sum payment or additional partial payments for a number of months to bring the loan current. Forbearance may be an option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly). Forbearance isn't going to help you if you're in a home you can't afford.
Loan modification: You and your loan servicer agree to permanently change one or more of the terms of the mortgage contract to make your payments more manageable for you. Modifications may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A modification also may involve reducing the amount of money you owe on your primary residence by forgiving or canceling a portion of the mortgage debt.
Under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt may be excluded from income when calculating the federal taxes you owe, but it still must be reported on your federal tax return. View more information.
Before you ask for forbearance or a loan modification, be prepared to show that you are making a good-faith effort to pay your mortgage. For example, if you can show that you've reduced other expenses, your loan servicer may be more likely to negotiate with you.
Source: Federal Trade Commission
What is the California Foreclosure Prevention Act?
On June 15, 2009, the California Foreclosure Prevention Act became operative. The Act modifies the foreclosure process to provide additional time for borrowers to work out loan modifications with their servicers. View more information.
What is the Making Home Affordable Program?
The Federal Making Home Affordable Program offers two different potential solutions for borrowers: (1) refinancing mortgage loans, through the Home Affordable Refinance Program (HARP), and (2) modifying mortgage loans, through the Home Affordable Modification Program (HAMP). To find out if you are eligible, visit the Making Home Affordable website.
What if I can't get help from the above agencies? What do I do?
Not every situation can be resolved through foreclosure prevention programs. If you're not able to keep your home, or if you don't want to keep it, consider:
Selling Your House: Your servicers might postpone foreclosure proceedings if you have a pending sales contract or if you put your home on the market. This approach works if proceeds from the sale can pay off the entire loan balance plus the expenses connected to selling the home (for example, real estate agent fees). Such a sale would allow you to avoid late and legal fees and damage to your credit rating, and protect your equity in the property.
Short Sale: Your servicers may allow you to sell the home yourself before it forecloses on the property, agreeing to forgive any shortfall between the sale price and the mortgage balance. This approach avoids a damaging foreclosure entry on your credit report. Under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt on your primary residence may be excluded from income when calculating the federal taxes you owe, but it still must be reported on your federal tax return. For more information, see www.irs.gov, and consider consulting a financial advisor, accountant, or attorney.
Deed in Lieu of Foreclosure: You voluntarily transfer your property title to the servicers (with the servicer's agreement) in exchange for cancellation of the remainder of your debt. Though you lose the home, a deed in lieu of foreclosure can be less damaging to your credit than a foreclosure. You will lose any equity in the property, although under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt on your primary residence may be excluded from income when calculating the federal taxes you owe. However, it still must be reported on your federal tax return. For more information, see www.irs.gov. A deed in lieu of foreclosure may not be an option for you if other loans or obligations are secured by the property on your home.
Source: Federal Trade Commission
I need immediate legal assistance. Who can help me?
You should consult with a private attorney. Visit the State Bar website for assistance in locating an attorney
For free legal aid referrals, visit LawHelpCalifornia.org.