If you are struggling to make your payments
If you are current but having trouble paying your mortgage, you should contact your mortgage servicer. You do not have to be behind to qualify for a loan modification. However, if you are current, you will have to show that you are at risk of imminent default.
Do not stop making payments. A default in payment brings you closer to foreclosure and damages your credit score.
If you are current on your mortgage, you may be able to refinance with a different lender. A refinance could lower your interest rate and monthly payment. For refinancing options, talk to the lending department at your preferred banking institution.
If you are behind on payments
Do not ignore the problem. Open the letters from your lender or servicer and answer their phone calls. Be honest about your situation. The earlier you talk to your servicer, the better your chances of working together for a solution. 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.
Speak to qualified advisers
Many resources can give you free guidance on avoiding foreclosure. These resources have trained advisers who can help with budgeting, talk about options, and speak with your servicer. Watch out for those who makes promises and ask for payment of upfront fees. Such offers are likely fraudulent and against the law.
Know your rights
There are many steps a servicer must take before they can foreclose on your home. To begin they must give you a default notice and a 90-day “right-to-cure” period. To cure, you will need to make all your missed payments to the lender before the cure period ends. If you can't cure, you can use this period to apply for a loan modification.
You may also receive a Right to Request a Modified Mortgage Loan notice. If you get this notice, read it carefully. Review and complete the Notice of Election form and return it to the address listed by the due date. Even if you do not receive this notice, you can still apply for a loan modification with your servicer.
The Service Members’ Civil Relief Act (SCRA) of 2003 also protects homeowners.The SCRA covers all active duty service members, reservists, and members of the National Guard while on active duty. Under the SCRA, if a service member is on active duty, mortgage lenders can't foreclose on or seize property for failure to pay. This protection applies for 90 days after active duty.
If you received a SCRA hearing notice and you believe you or someone else is entitled to the SCRA’s benefits, be sure to should follow the notice’s instructions.
If you receive the SCRA notice but it doesn't apply, you should still contact your mortgage servicer about applying for a modification. The SCRA notice is one of the steps the servicer takes in the forclosure process. The SCRA notice doesn't mean it is too late to apply for a modification or other foreclosure prevention options. But, it is very important you apply right away.
Want to know more? Here are specific Massachusetts laws about the foreclosure process:
-Massachusetts General Laws Chapter 244
-Code of Massachusetts Regulations, Title 209, Section 18.21A
-Code of Massachusetts Regulations, Title 209, Section 56
Here are federal laws about mortgages:
- Code of Federal Regulations, Title 12, Chapter X
Understand your options
There are several options available to homeowners facing foreclosure. It's important to know which one is best for you. You may need fill out an application to find out your specific options.
Your lender might be willing to rewrite the terms of the homeowner's loan to address a delinquency. This is called a loan modification. A loan modification may be able to make your monthly payment more affordable. It is a long-term solution for when the original payments are unaffordable. Please see The Loan Modification Process section for more information.
Forbearance or Repayment Plans
A forbearance or a repayment plan are temporary agreements that may help stop the foreclosure process.
A forbearance lets you pay less for a certain amount of time. However, most often, any unpaid amounts will be due at the end of the forbearance. Before entering into a forbearance agreement make sure you understand its terms and whether you will be required to make a large lump sum payment at the end of the forbearance period. As you near the end of your forbearance, be sure to discuss other options with your servicer.
If you had a setback for a short time but now have increased income, you may want to ask about a repayment plan. In a repayment plan, you pay an increased amount for a short period. This allows you to catch up on missed payments over time. In the end, you cure the default without changing the loan terms.
Short Sale or Deed-in-Lieu
Short sales and deeds-in-lieu of foreclosure are "liquidation options." This means that through these options you avoid foreclosure but do not keep the property.
In a short sale, the lender lets you sell the property to a third party for less than what you owe. If you are interested in a short sale, you may want to talk to a real estate agent about listing your property.
In a deed-in-lieu of foreclosure, the lender agrees to take back the property.
Both a short sale and deed-in-lieu of foreclosure may result in you still owing money to the lender or can have serious tax consequences. Make sure understand what you are agreeing to and consult with a tax professional or a lawyer before making any final decisions.
Bankruptcy is a complex process, and, there are limits to what you can do through bankruptcy. If you are thinking about bankruptcy, you may want to talk to a bankruptcy attorney or look at consumer bankruptcy guides. Non-profit consumer advocacy organizations, like the National Consumer Law Center, put out guides to help you understand your rights and obligations in a bankruptcy. If you decide to hire an attorney, make sure you understand the attorney’s role and fee structure.