Information from the Federal Housing Administration
Steps to Take When You Can't Pay Your Mortgage

1. Contact your lender as soon as you have a problem

Many people avoid calling lenders about money troubles because we:
• Feel embarrassed discussing money problems with others.
• Believe that if lenders know we are in trouble, they will automatically rush to a collection agency or foreclosure (seize property for failure to pay a mortgage debt).

But lenders want to help borrowers keep their homes because:
• Foreclosure is expensive for lenders, mortgage insurers and investors.
• HUD and private mortgage insurance companies and investors like Freddie Mac and Fannie Mae require lenders to work aggressively to help borrowers facing money problems.

Lenders have workout options (choices) to help you and:
• These options work best when your loan is only one or two payments behind.
• The farther behind you are on your payments, the fewer options are available.

Don't assume that your problems will quickly correct themselves:
• Don't lose valuable time being overly optimistic.
• Contact your mortgage lender to discuss your circumstances as soon as you realize that you're unable to make your payments.
• Look forward to your lender being willing to explore many possible solutions, without guaranteeing any one particular solution.
  
  Finding your lender
  
  Check the following sources to contact your lender:
  • Your monthly mortgage billing statement.
  • Your payment coupon book.

 
Information to have ready when you call

To help you, lenders usually need:
• Your loan account number.
• A brief explanation of your circumstances.
• Recent income documents:
  • Pay stubs.
  • Benefit statements from Social Security, disability, unemployment, retirement, or public assistance.
  • Tax returns or a year-to-date profit and loss statement, if self-employed.
  • A list of household expenses.

Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a "loan workout" package. This package contains information, forms and instructions. If you want to be considered for assistance you must complete the forms fully and truthfully and return them to your lender quickly. Your lender will review the complete package before talking about a solution with you.

CALL YOUR LENDER TODAY! The sooner you call, the sooner help is available.

Don't ignore mail from your lender

If you don't get in touch with your lender, your lender will try to contact you by mail and phone soon after you stop making payments. It is very important that you respond to mail and phone calls offering help. If your lender doesn't hear from you, they will have to start legal action leading to foreclosure. This will greatly increase the cost to bring your loan current.

Information for families with FHA-insured loans

The FHA provides many alternatives and ways for borrowers to get help. These may include mortgage modifications (changes), special forbearances (allowances), and other actions you can take to avoid foreclosure.

FHA works closely with customers who have FHA-insured loans. Do you feel your lender is not responding to your questions? Do you need help contacting your lender? The FHA is ready to help! Contact us at (800) CALL-FHA.

2. Talk to a housing counselor

If you don't feel comfortable talking with your lender, you should immediately contact a housing counseling agency and make an appointment with a counselor. Most FHA counselors are free or cost very little. A counselor can help you:

• Review your financial situation, determine what options are available to you, and negotiate with your lender.
• Learn which of the various workout arrangements lenders consider makes the most sense for you and your family, based on your circumstances.
• Call the lender with you or on your behalf to discuss a workout plan.
• Protect you from future credit problems before you get too far behind on mortgage payments.
• Give you information on services and programs in your area that provide financial, legal, medical or other assistance.

A good counselor will help you create a monthly budget plan to ensure you meet all your monthly expenses, including your mortgage payment. Your personal financial plan will clearly show how much money you have available to make the mortgage payment. This analysis will help you and your lender determine whether a reduced or delayed payment schedule could help you.

To find out more about HUD-approved housing counseling agencies and their services, please call toll free (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern Standard Time (6:00 a.m. to 2:00 p.m. Pacific Time). The same number can give you an automated referral to the three housing counseling agencies located closest to you.

Many of these local housing counseling agencies are connected with national and regional housing counseling intermediaries (mediators). The website for HUD-approved National and Regional Housing Counseling Intermediaries describes the full range of assistance offered and provides maps showing their member's locations.

3. Prioritize your debts (rank them by importance)

You will need a new, tightened budget if you lose a job. Prioritize your bills and pay those most necessary for your family: food, utilities and shelter.

Failing to pay any of your debts can seriously affect your credit rating, but if you stop making your mortgage payments you could lose your house. Try these suggestions to keep your home:

• Whenever possible, use any income available after paying for food and utilities to pay your monthly mortgage payments.
• If your employment income has stopped or been reduced, first consider getting rid of or cutting back on other expenses (such as dining out, entertainment, cable, or even telephone services).
• If you still do not have enough income, consider cashing out other financial resources like stocks, savings accounts, or personal property that may have value like a boat or a second car.
• Take any responsible action that will save cash.
   

Besides speaking with your lender, you may want to contact a nonprofit consumer credit counseling agency that specializes in helping restructure credit payments. Credit counselors can often reduce your monthly bills by negotiating lower payments or long-term payment plans with your creditors. Trustworthy credit counseling agencies provide their services free of charge or for a small monthly fee tied to a repayment plan. Beware of credit counseling agencies that offer counseling for a large upfront fee or donation.

For consumer debt advice, contact www.debtadvice.org/

When you call a credit counseling agency, they will ask you to provide current information about your income and expenses. Make sure you ask if the agency has a charge before you sign any documents!

Preserve your good credit

Do not underestimate (misjudge) how important it is to keep your good credit. Your future ability to purchase items, rent or buy a home, and do other things often requires a credit check. Consumer credit agencies and your lender can help you explore solutions to keep your credit rating from getting blemished.

Maintaining good credit is even important for job hunters. When you apply for a job, the employer probably will check your credit report to determine whether:

• You have been sued.
• You have filed for bankruptcy.
• You have trouble paying your bills.