Homeowners at risk of foreclosure can notify their lender before the first missed payment. The Department of Housing and Urban Development, which oversees the Federal Housing Administration's mortgage insurance programs, recommends seeking help from HUD-approved counselors as soon as you know you can't make your FHA loan payments. Although your lender can help you well into the pre-foreclosure stages, you and the HUD counselor must act quickly to stave off foreclosure.
Help for Cash-Strapped Borrowers
The FHA helps borrowers of modest means acquire financing for a primary residence. Borrowers with relatively low credit scores and minimal down payment funds or equity can buy or refinance a home with an FHA-backed loan more easily than with conventional financing. The federal program insures participating lenders against losses if borrowers default, and this allows lenders to bear the added measure of risk associated with some FHA borrowers. As the agency's governing body, HUD provides counseling resources for FHA borrowers in pre-foreclosure due to financial hardship such as a job loss or increased expenses.
How the HECM Does That Happen?
Although the FHA's most widely used program helps borrowers of forward mortgages -- loans that borrowers repay monthly -- the FHA also helps reverse mortgage borrowers by paying them based on home equity. The Home Equity Conversion Mortgage, called HECM, requires that senior-citizen applicants of 62 years and older undergo HECM counseling before getting a loan. Borrowers in financial straits can also access HECM counselors. A HECM borrower may end up in pre-foreclosure due to his inability to keep up with property taxes and homeowners insurance payments. An FHA lender can foreclose on a property with a HECM loan due to such delinquency.
Get In Touch
The FHA's National Servicing Center acts as the agency's hub for loss mitigation programs. Borrowers in pre-foreclosure can contact the center for information on home-retention programs and policies, as well as counseling services. To contact the center regarding a forward mortgage, call 877-622-8525. You can also call 800-569-4287 for the HUD counseling agency nearest you, according to a HUD pamphlet on foreclosure prevention.
To contact the National Servicing Center about a reverse mortgage, call 800-594-9057 or 918-292-8900. Borrowers with hearing or speech impairments can call the Federal Information Relay Service at 800-877-8339. HECM counseling for seniors is available over the phone or face-to-face.
Options for Pre-Foreclosure Clients
HUD pre-foreclosure counselors are trained by the department to provide the most current information on FHA foreclosure-prevention programs. The counselors work with government agencies, and with private and community organizations. Although organizations usually offer counseling free of charge, you may have to pay a low-cost service fee, depending on the organization you choose. There are several loss-mitigation options for FHA borrowers in default. One is the pre-foreclosure, or "short sale" program, in which you sell your home for less than the amount you owe. Another is loan modification or payment restructuring, and another is "deed in lieu of foreclosure," in which you deed the home to your lender. Counselors can also provide credit counseling services, according to HUD.
- Department of Housing and Urban Development: Avoiding Foreclosure: FHA-Insured Mortgages
- Department of Housing and Urban Development: HUD Office of Housing Counseling: HUD Intermediaries Providing HECM Counseling Nationwide
- Chicago Tribune: FHA Seeks Tighter Reverse Mortgage Rules
- FHA.com: Can a HECM Become Delinquent?
- Department of Housing and Urban Development: How to Avoid Foreclosure: What Should I Do?
Karina C. Hernandez is a real estate agent in San Diego. She has covered housing and personal finance topics for multiple internet channels over the past 10 years. Karina has a B.A. in English from UCLA and has written for eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.