"Help” I Can't Pay My Mortgage!

Disasters often force us to make extremely difficult choices. Whether you like it or not, in times of crisis you may have to choose between paying for the necessities of life and maintaining timely payments to those whom you owe money. These difficult decisions can drive you to fall behind on bills, mortgages, car and credit card payments, and other debts.

Some people are unable to pay their mortgages right after the disaster but can catch up within a few months as their lives gradually return to normal. Others have reserves or sources of cash that help them maintain their obligations for a few months until savings and other funds run out.

While many lenders are patient and understanding in the aftermath of disasters, most expect customers to re-establish timely payments or stick with payment plans within a reasonable amount of time.

Don't Delay; Talk with Your Lender

It is important for you to work with your lender if you are behind on your mortgage — this can reduce the possibility of foreclosure and eviction. The unfortunate truth is that most borrowers either avoid contact with their lenders altogether or wait until it’s too late to save their homes.

Take measures to protect the equity in your home. Your equity is the value you have in your house, taking into consideration the value of the house minus any loans you have against it. Your home can help you build wealth, and it's likely to gain in value over time. No matter what the circumstance, whether disaster or other life situations, it's best to call your lender right away if you are having difficulty making your loan payments. Lenders have a number of ways they may be able to help. However, you need to talk to your lender early in the process, while there are still many options your lender can offer.

The financial community wants to support borrowers in the hurricane recovery process. When calling or talking with a mortgage lender, be sure to tell the customer service representative all of the details of your situation. If you need help, ask for it. If you are asked to do something, but are unable to do so, tell the customer service representative about your limitations. Mortgage lenders want to be helpful, but they need to know your circumstances in order to offer you the best options and help avoid foreclosure proceedings. The truth of the matter is that it costs a lot for everyone involved when a foreclosure occurs. Foreclosure is not a good solution for borrowers, communities, or mortgage lenders. In addition to speaking with your lender, you may also contact a housing or foreclosure prevention counselor for advice and guidance.

Work with Your Lender or Loan Servicer to Prevent Foreclosure

Remember, foreclosure is avoidable. The following options may be available, especially if you begin working with your lender early in the process of your financial difficulties:

Forbearance You are allowed to delay payments for a short period, with the understanding that another option will be used afterwards to bring your mortgage up-to-date.

Reinstatement This is when you are behind in your payments, but you can promise a lump sum to bring your mortgage up-to-date by a specific date.

A repayment plan If your account is past due, but you can now make payments, the lender may agree to let you catch up by adding a portion of the past-due amount to each monthly payment until your account is current.

Modifying your mortgage You and your lender can renegotiate your mortgage to extend the term (length) of your loan or take other steps to reduce your payments. One potential solution is to add the past due amount into your existing loan, and finance it over a long term.

Selling your home If catching up on payments is not possible, the lender might agree to put foreclosure on hold to give you some time to try to sell your home.

Property give-back The lender can allow you to give back your property and then forgive the debt. While give-backs do hurt your credit rating, they don't hurt as much as a foreclosure. The lender might require that you attempt to sell the house for a specific time period before agreeing to this option, and it might not be possible if there are other liens (mortgages or other debts) against the home.

HUD Foreclosure Prevention Check It Out! There are a number of programs administered through the U.S. Treasury Department and HUD to assist homeowners who are at risk of foreclosure and otherwise struggling with their monthly mortgage payments. A summary of these various programs can be found on HUD's website http://portal.hud.gov/hudportal/HUD?src=/topics/avoiding_foreclosure. On this site, you can explore options such as loan modification and refinancing, find links to HUD foreclosure prevention counselors, and other useful information. Distressed homeowners are encouraged to contact their lenders and loan servicers directly to inquire about foreclosure prevention options that are available. If you are experiencing difficulty communicating with your mortgage lender or loan servicer about your need for mortgage relief, you can also find information about and links to organizations that can help contact lenders and servicers on your behalf at the webpage listed above. For FHA loans, HUD's National Servicing Center (NSC) works with lenders to find ways to avoid foreclosure on borrowers mortgages. Information and frequently asked questions (FAQ's) for both lenders and borrowers regarding FHA loan servicing and preventing foreclosure are available at www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm or by calling 877-622-8525. Search for HUD-approved foreclosure prevention counselors at www.hud.gov/offices/hsg/sfh/hcc/fc/.

HUD Relief for certain FHA, Fannie Mae and Freddie Mac, you may be eligible for a loan modification or forbearance. Also, for those homes located within the Federally Declared Disaster (FDD) zone, HUD has instituted a 90-day moratorium on foreclosures of Federal Housing Administration (FHA) insured mortgages.