Communicate

Communicate with Your Lender

Many people lose their homes because they are too ashamed to act, or they go into denial about the seriousness of the problem. To prevent foreclosure, be decisive and explore all solutions. Contact your lender at the number on your statement at the first sign of trouble—even if you have not missed a payment but you think you might have to in future. Your lender will make notes about your phone call in your account file. Reputable lenders and loan servicers should view your contact as an indication that you are committed to fixing the problem rather than avoiding it. The lender may begin discussing possible solutions to your payment problem.

If you have already missed a payment and have not contacted the lender yet, do so immediately. Do not ignore letters or calls from the lender! The longer you wait to act, the fewer options you will have.

If your loan is with a predatory or abusive lender, your phone call might not help. However, it will not speed up a foreclosure since your state's law dictates the foreclosure timeline. If you suspect you have a predatory loan—and especially if you believe you will miss a payment—contact a HUD-approved housing counseling agency or one of the other organizations listed in under Avoiding foreclosure scams.

To prepare for your discussion with your lender or a counselor, record your income and expenses and calculate the equity in your home. To figure your equity, estimate the current market value of your home, minus the outstanding balances of your first mortgage and any second mortgage or home equity loan. Then think about and jot down answers to the following questions:

Problem. What has happened to cause you to miss your mortgage payment(s)? Do you have any documents to back up your explanation for falling behind (for example, a doctor’s letter or a notice of unemployment benefits)? What, if any, efforts have you made to resolve the problem?

Outlook. Is this problem temporary, or is it long-term or permanent? What changes in your situation do you see in the short term? In the long term? Are there other financial issues that might get in the way of getting back on track with your mortgage?

Solution. What would you like to see happen? Do you want to keep the home? What type of payment arrangement would be feasible for you?

Commitment. How committed are you to making a solution work? Will you return calls and submit required documentation and forms to the lender on time?

Throughout the foreclosure prevention process:

• Keep a folder in which you note all communications with the lender, including type and time of contact, name of representative, and outcome.
• Follow up any oral requests you make with a letter to the lender. Send it to the lender using certified mail so that you can make sure it got there. If you ask for a "Return Receipt" you will receive proof of delivery. Keep a copy of your letter.
• Make only promises you are absolutely sure you can keep.
• Meet all deadlines given by the lender.

Stay in your home during the process, since you may not qualify for certain types of assistance if you move out. (You can choose to rent out your home, but this will change it from a primary residence to an investment property. This will most likely disqualify you for any additional “workout” assistance from the lender, so be sure that the rental income is enough to help you get and keep your loan current.)

This brochure was created by Consumer Action’s Housing Information Project. © 2007 Consumer Action. Rights Reserved.