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Home >> Lending >> Home Mortgage
FHA Loan Foreclosure Options
If you have an FHA loan and are having trouble making the payments, you may be entitled to additional relief that is not normally offered to traditional borrowers. Of course, only your lender can give you exact details, but below are some options and details specific to FHA loan retention.
Special Forbearance
Although non-FHA loans may qualify for forbearance, there is normally more flexibility associated with FHA loans. If you are behind on your loan, a special forbearance might reduce or suspend payments for a set period of time. For example, if you were recently laid off, and this loss of income has made it impossible for you to make payments, your lender might allow you to stop mortgage payments for a set amount of time while you look for another job. Often the interest may be lowered or forgiven for a time as well. Sometimes, these loan payments might be waived, while other situations may require you to repay the missed payments at a later time.
Partial Claim
If your loan is delinquent and you know that you are unable to pay the past due amount, speak to your lender about an FHA partial claim, which is essentially a loan in any amount necessary to reinstate the delinquent mortgage. Generally, this loan is interest-free and is expected to be paid off at the end of your loan. In other words, instead of your loan ending in six years, the loan might be extended an extra year so that you can pay off the partial claim. The partial claim could be for up to twelve months of mortgage payments.
Other Options
In addition to the two options above, those with FHA loans may also qualify for mortgage modification, pre-foreclosure sales, and deed-in-lieu of foreclosure. Which of these options work best would depend on whether or not you wanted to stay in your home. Forbearance, partial claim, and mortgage modification are aimed at homeowners who want to stay in their homes. Deeds-in-lieu of foreclosure and the pre-foreclosure sale option are designed for homeowners who no longer wish to keep their homes.
FHA Notifications
If you have an FHA loan, once you begin to miss payments, the lender must follow a certain timeline as well. At 45 days delinquent, the lender should provide you information on foreclosure options and HUD counseling services. This information should be provided in writing. Your lender must also evaluate you for loss mitigation by the time you become 90 days past due. That means that your lender must look at which alternatives work best for your particular situation. Why you are delinquent as well as whether or not you want to keep your home will play a large part in what alternatives are available to you.
Remember, even with an FHA loan, your best solution is to speak with your lender, as soon as you experience payment problems. Lenders generally want to avoid foreclosure, and are in the best position to help you decide which foreclosure option is best for you.
Published on BankingQuestions.com 11/21/08
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