June 13, 2024

The First Step When Facing FHA Mortgage Foreclosure Is To Find Out What Your Options Are

Not since the Great Depression have so many American homeowners faced hard economic times.   High unemployment, a very slow economy and lack of income growth have resulted in millions of homeowners facing foreclosure.  The crash in real estate values since 2008 has resulted in negative equity for millions of FHA borrowers which makes refinancing or selling a home almost impossible.

The FHA loan program has a very high default rate of over 8% due to the above mentioned factors as well as liberal FHA underwriting standards that have approved financing for individuals who were not financially prepared for the costs of home ownership.  As a result, many homeowners now face the traumatic situation of dealing with foreclosure.

The tendency of many homeowners facing foreclosure is to do nothing and hope that the problem will go away or be resolved.  Unfortunately, short of winning the lottery, most foreclosures grind on and in many cases, the homeowner winds up losing the home.

Sometimes, becoming a renter again may be the best financial option if the cost of owning a home becomes financially impossible due to job loss, divorce or other situations which result in permanently reduced  income.  In other cases, however, many homeowners may be facing a temporary financial problem that can ultimately be resolved.  Either way, the first thing a homeowner must do when struggling with a mortgage payment or facing foreclosure is to find out what options are available to avoid foreclosure.

As noted in a previous post, the FHA offers free help to homeowners who are having difficulty making mortgage payments or facing foreclosures.  The FHA provides these services through HUD-approved housing counselors.

In addition to the HUD counselors, Fannie Mae has established a website at KnowYourOptions.com which provides in depth advice to troubled homeowners.  Fannie Mae provides a wealth of information that can help a homeowner stay in their home or if that is not possible, provides viable options to leave the home.  In addition, the website offers advice on how to avoid predatory practices of scam companies that falsely promise to solve a troubled homeowner’s problems.

The options available to homeowners who want to remain in their homes include refinancing, repayment plans, forebearance, special military forebearance plans, loan modifications and deed-for-lease.  Options for leaving a home include short sales and deed-in-lieu of foreclosure.  Any homeowner struggling with mortgage payments or facing foreclosure would be well advised to take advantage of the free information on the Fannie Mae website.