Homeowner’s Checklist for Avoiding Foreclosure
Start preparing your balance sheet at this time. If you are reading my blog and gone to my website, apparently you are not doing this for fun. You have some questions and you are looking for good answers. Following is a checklist of things to do. We had already analyzed your situation. It is time to do action and not to procrastinate anymore.
Note this checklist is not comprehensive and is not intended to provide legal advice. If you need legal advice, you should speak with a lawyer. Of course a Nevada licensed attorney can help you more than anyone.The best way to avoid foreclosure is to make your mortgage the first bill that you pay each month.
Before Trouble Starts
Start a file, in a safe place, for records relating to your home.
Purchase and sale agreement
Property tax bills
Property insurance information
Letters you receive from and copies of letters you mail to the bank
Use checks or money orders to pay bills.
Do not send cash
Do not use credit cards
Keep a record of all payments (date paid and check number)
Correct errors quickly
Pay high priority bills first.
Utilities (heat, hot water, electricity, gas)
Do not pay credit cards or other unsecured debts before the mortgage
When Things Start to Feel Tight
Where is the money going?
Create a budget that shows your current income and expenses
Review every item on your budget
Prepare a revised, realistic budget that you can live with until your circumstances improve
Increase your income.
Collect federal and state benefits if you are eligible
Claim the earned income tax credit if you are eligible
Stop all voluntary deductions being taken out of your paycheck
Consider selling unnecessary property to raise money
Reduce your expenses.
Review every expense for potential savings — reduce or eliminate unnecessary expenses
Pay only for the type of phone service you need
Cancel cable television service temporarily
Identify ways to conserve on energy and other utilities
Participate in a home weatherization program
Review your homeowner’s and auto insurance policies and shop around
Claim the owner occupant property tax exemption and others for which you are eligible
Contact your mortgage servicer at the first sign of trouble
Ask your utility company for budget billing so you can pay the same amount each month
If you are behind on your utility bills, start an affordable repayment plan
After Falling Behind
Identify the problem.
What caused your current situation (job loss, illness, divorce, decreased income)
How long do you expect your difficulty to last
What specific type of help do you need
How much can you afford to pay toward your mortgage
Speak with your bank’s delinquent loan or loss mitigation specialist
Explain your situation
Ask for a mortgage workout package
Keep a phone log that shows the date and time of your call, who you spoke to, the person’s phone number, and what was said
Follow up your phone call with a letter and keep a copy for yourself
Send all letters by certified mail and keep the receipt
Pay what you can and save the rest.
Send to the bank as much of the mortgage payment as possible
If the bank returns your payment, save the money and do not spend it on other bills
Know Your Options
There are many ways the bank can help you if you fall behind on your mortgage. Which one you choose/need and what the bank allows will depend on your individual situation.
Reinstatement: You give the bank all of the back payments you owe and start making your regular monthly payment.
Partial Reinstatement: You pay at least one-half of the back payments first and agree to a repayment plan for the rest of what you owe.
Repayment Plan: You make the regular mortgage payment plus an additional amount toward the back payments until you are caught up (usually no longer
than 12 months). If the bank sets up a repayment plan for you, make sure it is
reasonable. Do not agree to a plan that will not work for you.
Forbearance: The bank agrees that for a limited period of time it will accept a lower monthly payment or no monthly payment. At the end of the forbearance
agreement you must bring the account current.
Modification: The bank agrees to change one or more terms of the mortgage.
Possible changes include: reducing the interest rate, extending the term of the mortgage and adding the arrears to the unpaid principal balance of your loan.
Short Sale: The bank may let you sell the home even if you owe more than the property is worth and agree to accept the lesser amount as payment in full. You must have a buyer and a signed purchase and sale agreement. Anyone else who has a lien on the property and the private mortgage insurer, if there is one, must also agree to the short sale.
Make Whole Sale: You sell the home and the money from the sale pays off the mortgage and any other liens on the property. A make whole sale does not require the bank’s approval.
Refinance: You take out a new mortgage to pay off the old mortgage.
Sometimes it makes sense to refinance. You should contact a legitimate lender and proceed carefully. Beware of large fees and high interest rates.
Deed-In-Lieu: You cannot afford to keep the home and you give the house back to the bank. Do not ask for a deed-in-lieu when you have equity in the property
or when a short sale is possible. The bank will not accept a deed-in-lieu if there are other liens on the property.
Documentation for A Workout (May vary from bank to bank)
Signed and dated letter that briefly explains what happened
Documentation of your hardship (doctor’s letters, etc.)
One month worth of pay stubs or other proof of income
Two most recent signed federal tax returns and W2s (3 years if self employed)
An accurate budget showing all of your monthly income and expenses
A list of your assets (cars, bank accounts, etc.)
A list of your liabilities (mortgages, loans, liens, other outstanding debts)
This package must be complete before the bank will review it
Keep copies for your file
Other Things to Know
Talk to a lawyer or counselor experienced in default and delinquency counseling
If you cannot reach a solution with your bank
If you disagree with the amount the bank says you owe
If you wish to consider filing bankruptcy
Foreclosures move very quickly
Keep track of deadlines
Do not wait until the last minute to get help
Your rights will be cut off once the foreclosure sale takes place
Foreclosures are public
Foreclosure notices appear in newspapers and court records
Some people may try to take advantage of you by offering a quick fix
Carefully review offers to refinance or consolidate your credit card debts with your mortgage as this may make matters worse
Avoid deals with high interest rates and large fees
Do not agree to sell your home to someone who claims they will lease it back to you
Talk to a lawyer or housing counselor before you sign anything
Where to go for help
Your local non-profit housing organization
Your mortgage company
The U.S. Department of Housing and Urban Development (HUD)
Name and phone number of agency providing this list
Name and phone number of housing agency at city/town hall
Phone number of your local HUD office
Many thanks to National Consumer Association for this article.