If You Are Behind in Payments
If you are currently having trouble paying your mortgage or expect problems in the future, it's crucial that you get help now. If you fall behind and don't take action, your lender will take steps to foreclose on your home. If that happens, you may lose your home and all of the money you have already invested in it.
Don't Ignore the Problem
Open the letters from your lender and answer their phone calls. Be honest about your situation as early as you can. If you communicate early enough with your lender, you have a much greater hope to work together to find a solution.
Find Your Original Loan Documents
You should keep copies of all loan documents given to you and store them in a safe and secure place. You will need to understand the exact terms of your loan agreement so that you can better evaluate your options.
Speak to Qualified Advisors
Many state and federal entities offer free guidance on this issue, as well as nonprofit agencies and other organizations. Skilled advisors can help you examine your budget, sort out your options, and prepare you to speak with your lender. In the event your lender is not willing to help, they may be able to help you find another lender who is willing to work with you and offer you a fair and affordable loan. For a list of resources, please visit the Tips and Resources for Distressed Homeowners section of this website.
Understand Your Options
Once you understand the terms of your loan and have spoken with trusted advisors you will be in a position to seek a solution. Your lender may be willing to offer loan modification options.
You may be able to stave off the foreclosure process by working with the lender to create a temporary repayment plan (also referred to as a "forbearance plan"). In a best-case scenario, the homeowner may be able to bring the loan current over a period of time and either keep the property or at least allow time to market and sell the property at a fair market value without the pressure or cost of an impending foreclosure action. Some lenders will enter into forbearance plans that do not fully bring the loan current if they are aware the homeowner is marketing the property for sale. But if your monthly payment is beyond your means, a forbearance or repayment plan may not be feasible, and you should pursue a "loan modification."
In some instances, a lender may be willing to rewrite the terms of the homeowner's loan in order to address a delinquency. A loan modification is designed to make your monthly payment affordable. It is intended to serve as a long-term solution when the monthly payments under the original loan terms are unsustainable for the borrower. Loan modifications may require the homeowner to pay a processing fee, but already-distressed borrowers should strive to avoid or minimize fees. For more information, view the Navigating the Loan Modification Process section of this website.
In the past year, both the federal and the Massachusetts governments have worked to develop programs that would allow certain borrowers at risk of default to refinance their homes via governmentally insured programs. The homeowner may be able to avail him or herself of such a program.
Bankruptcy might be an option for a homeowner to consider. The filing of a bankruptcy petition automatically stops a lender's foreclosure action until such time as the lender obtains the Bankruptcy Court's permission to proceed.