A Foreclosure is a legal process in which a mortgage lender or lien holder attempts to recover the balance of a loan or debt from someone who has stopped making payments by forcing the sale of the asset used as the collateral for the loan or on which a lien has been placed.
A property can be foreclosed on if the property owner defaults on his or her mortgage payments or becomes delinquent in property taxes payments.
1) What if I miss a mortgage or tax bill payment?
DO NOT IGNORE LETTERS FROM YOUR LENDER(S) OR TAXING AUTHORITIES. Call or write your lender(s), or taxing authority from which you received notice that you are PAST Due.
When in touch with a lender: be prepared to provide your financial information and reasons for your missed payment(s). Talk to them about services and programs offered by the city, federal government or the lender to help you keep your real estate. Discuss options such as selling the property, re-financing, short sales, loan modifications, and second mortgage opportunities. If you have experienced a recent change in your financial situation - reduction of income or increase in living expenses – you may qualify for a temporary suspension of payments or other relief offered.
Don’t ignore notices from the city or past due notice taxes or municipal utilities. Call immediately (help information will be on your notices and/or invoices) and seek a payment schedule.
2) What Are My Alternatives?
If you become delinquent in mortgage or property tax payments, here are some options you may be able to work out with your lender or the taxing authority:
Special Forbearance: Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.
Mortgage Modification: You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.
Partial Claim: Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current. You may qualify if:
- Your loan is at least 4 months delinquent but no more than 12 months delinquent.
- You are able to begin making full mortgage payments.
When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay your lender the amount necessary to bring your mortgage current. You must execute a Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in full. The Promissory Note is interest-free and is due when you pay off the first mortgage or when you sell the property.
Pre-foreclosure Sale: This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan. You may qualify if:
- The loan is at least 2 months delinquent
- You are able to sell your house within 3 to 5 months
- A new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines.
Deed-in-lieu of foreclosure: As a last resort, you may be able to voluntarily “give back” your property to the lender. This won’t save your house, but it is not as damaging to your credit rating as a foreclosure. You may qualify if:
- You are in default and don’t qualify for any of the other options
- Your attempts at selling the house before foreclosure were unsuccessful
- You don’t have another FHA mortgage in default
Property Tax Payment Plan: If your property is in danger of foreclosure due to a tax delinquency, The City of Philadelphia Revenue Department will work with you to work out a payment schedule to pay off the amount in which your taxes are delinquent over a period of several months. Contact the Revenue Department at (215) 686-6442 for assistance.