Avoiding Foreclosure: Tips for Consumers
Tip #1: Free Counseling
Housing counseling agencies sponsored by the United States Government offer valuable resources to help you discover special borrower programs. Most of these services are free of charge. Contact the US Department of Housing and Urban Development (HUD) at (800) 569-4287 or visit the department’s website at www.hud.gov for more information.
Tip #2: Talk to Your Lender
Many lenders offer assistance, but only for those who stay in the home and do not abandon it. For example, the lender may have a special forbearance program to rearrange payments, or even reduce or suspend them for a period of time. The lender may also refinance the debt or extend the term of the loan to make the payments lower.
Tip #3: Avoid Scams
Unfortunately, ther are those who prey upon people in financial difficulty. Most likely, anything that sound too good to be true probably is. To avoid scams it is important for the borrower to:
- Check with a lawyer or the mortgage company before entering into any transaction involving the property.
- Remember that the loan must be paid even if the deed is signed over to someone else. The lender must formally release the mortgage debt.
- Make sure all promises are made in writing.
- Not sign anything with blanks to be filled in later.
- Read and understand all documents before signing.
Tip #4: Taxes Are Still Due
In addition to the damage it can do to a borrower’s credit rating, foreclosure can also cause major tax consequences. Most people assume that a foreclosure will automatically “cancel” taxes, but this is usually not true. That is why it is important to involve a tax attorney or advisor in all considerations of foreclosure and alternatives to foreclosure.
Tip #5: Consult a Licensed Realtor®
A licensed Realtor® (not just any real estate agent) will work with you on your various option to avoid foreclosure. Your Realtor® can assist in a pre-foreclosure sale or even a short sale of the property, which avoids the foreclosure process.