The beauty of homeownership provides a multitude of possibilities to benefit your future, but maintaining those significant financial responsibilities can be taxing.
Unexpected expenses, changes in income, or other financial hardships can create a barrier that keeps a homeowner from paying their monthly mortgage and can potentially lead to foreclosure.
As a homeowner, if you find yourself unable to pay your mortgage payments, consider the below tips.
Tips to Avoid Foreclosure Status
The Louisiana Housing Corporation (LHC) follows the federal guidelines of the U.S. Department of Housing and Urban Development (HUD) regarding foreclosure regulations. If you have missed a mortgage payment or feel you will be unable to make one in the future, there are a few actions you can take to prevent foreclosure.
1. Contact your Mortgage Servicer
Notifying your mortgage servicer about your current financial situation is essential. It shows due diligence on your end. Early communication is vital, and prolonging the issue may limit possible relief options in the future.
If you are unable to contact your mortgage servicer, then contact a HUD-approved housing counselor near you. https://hud4.my.site.com/housingcounseling/s/?language=en_US
2. Question to Expect
Once you have contacted your mortgage servicer or HUD-approved housing counselor, they will ask you a series of questions about your mortgage. Examples of these questions may include:
- Why are you unable to make payment?
- Is your situation temporary or permanent?
- Would you be willing to investigate other options provided by your servicer?
3. Document & Understand Your Alternatives
Depending on your situation, your mortgage servicer may provide loss-mitigation options and payment arrangements to rectify your situation. Some of those alternatives may include repayment options and important legal notices.
It’s important to save all those documents and ask questions regarding which alternative options are available. Understanding what is expected of you is important and it will help you easily navigate the process in the future.
Alternative options may include:
- Forbearance Plan: a temporary agreement with your mortgage servicer that allows you to reduce or pause your mortgage payments for a specific timeframe.
- Loan Modification: a permanent change to the terms of a homeowner’s existing mortgage to make payments more affordable. Loan modification changes may include lowering the interest rate, extending the loan term or adjusting the amount owed.
- Repayment Plan: allows you to catch up on missed mortgage payments by adding a portion of the overdue amount to your monthly payment over an agreed-upon period.
- Reinstatement: allows you to bring your mortgage back into good standing, by paying a single sum of the total amount you owe. This can also include missed payments and applicable fees or charges by an agreed-upon deadline.
- Partial Claim: an alternative option for eligible FHA-insured mortgages. Rather than a traditional loan, it is a federally funded advance that pays off missed mortgage payments. A partial claim can also allow certain past-due amounts to be placed into an interest-free subordinate lien against the property. The partial claim generally does not require repayment until certain events occur, such as the sale or payoff of the mortgage.
- Payment Supplement: an FHA loss-mitigation option that uses a partial claim to resolve eligible delinquent mortgage payments and temporarily reduce the homeowner's monthly mortgage payment for three years.
This is not legal advice. Additionally, these alternative options may only work in specific settings depending on the financial situation, the homeowner's mortgage servicer, and other eligibility requirements.
Next Steps if you are Unable to Keep Your Home
If a homeowner is unable to make their mortgage payments, waiting until foreclosure proceedings begin can make the situation harder to resolve. If you are unable to keep your home, there are other steps you can take.
1. Traditional Home Sale
Homeowners can put their homes up for sale if the current market value of their home is greater than the balance due on their loan. Remember, a traditional sale allows you to retain your home equity.
2. Pre-Closure Sale
This is when a homeowner’s current market value is not enough to pay the loan in full. Your mortgage servicer may be able to accept less than the full amount owed by approving eligible borrowers for a pre-closure sale otherwise known as a “short sale.”
3. Deed-in-lieu (DIL) of Foreclosure
In certain situations, homeowners may be eligible to voluntarily offer to deed (to give back) the property to HUD in exchange for the current mortgage. A deed-in-lieu may be considered when a homeowner is unable to complete a Pre-Foreclosure Sale or otherwise cannot retain the property. Certain homeowners may also be eligible for relocation assistance.
Overall, it’s best to take early action instead of waiting for foreclosure proceedings to begin. Foreclosure prevention options are designed to help eligible homeowners address their mortgage delinquency and, when possible, avoid foreclosure. By acting ahead of time, you will have more relief in the future. The sooner you understand your situation and communicate with your mortgage servicer, the more opportunity you may have to explore available options.
If you are facing issues with your home mortgage and are facing foreclosure, look into these organizations for assistance.
Southeast Louisiana Legal Services
- Offices Located in: Baton Rouge, Covington, Gretna, Hammond, Houma, New Orleans, and St. Charles Parish.
- Website: https://slls.org/en/
Acadiana Legal Service Corporation
- Offices Located in: Shreveport, Monroe, Natchitoches, Alexandria, Lafayette/Administrative, Lake Charles, and Franklin, LA.
- Website: https://www.la-law.org/
MidCity Redevelopment Alliance
- Location: Baton Rouge, LA
- Phone: (225) 346-1000
- Website: https://midcityredevelopment.org/foreclosure-prevention/
Louisiana Fair Housing Action Center
- Location: New Orleans, LA
- Phone: (504) 596-2100
- Website: https://lafairhousing.org/
- Note: Due to staff capacity, our foreclosure intervention intakes will take place only on Fridays. If cannot obtain an appointment within the month, please feel free to visit other HUD Approved Community Agencies who have similar mortgage assistance programs. For a list of agencies near you, please click here.
Southern University Law Center
- Location: Baton Rouge, LA
- Phone: (225) 771-2552
- Website: https://www.sulc.edu/