With so many foreclosures occurring these days, we wanted to offer some information to help readers and their clients avoid losing their homes. To help us understand the foreclosure process and resources to help, we turned to Project Sentinel, the parent organization of FRC partner Fremont Fair Housing and Landlord/Tenant Services. Project Sentinel is HUD certified to provide mortgage delinquency and default counseling services to home buyers and homeowners.

Before getting into the details of foreclosure and possible options, take some time to ask yourself these important questions. Do you want to keep your home? Is it worth the stress and financial drain? What is your ability to make future loan payments along with other payments like taxes and insurance? What will be the potential impact on your credit? What are your long-term goals and needs?

There are two stages of foreclosure - delinquency and default.

Stage 1 - Delinquency

When a borrower is one or more months behind in mortgage payments or other related payments such as property taxes, he or she is in the delinquent stage. This is your status before a Notice of Default is filed.

If you are delinquent, do the following:
- Contact your mortgage servicer immediately.
- Provide complete disclosure of the circumstances.
- Maintain homeowners insurance and property tax payments.
- Write a letter to your mortgage service that includes your name, address, phone number and loan number. Provide a brief explanation of your hardship and whether it is resolved or ongoing. Also include your intent towards the property; do you want to keep it or not?

If you are delinquent, do not:
- Avoid phone calls or ignore correspondence.
- Make promises you can't keep.
- Sign anything you do not understand.
- Pay any fee to any so-called counselor. Beware of Rescue Scams! These typically include offers to buy your house that result in equity skimming or stripping and phony counseling agencies that require upfront fees for promised modifications or credit repair.


Stage 2 - Default

At this point, the formal foreclosure process has been initiated. The actual steps and time frames are:
- A notice of Intent to Foreclose is mailed to you. A formal default will usually be filed 30 days later, unless an alternative arrangement is made.
- The Notice of Default is filed with the county recorder. This is the beginning of the formal foreclosure process. You have 90 days to bring your loan current or make an alternative agreement.
- A foreclosure sale is set after the 90-day period. You have 20 days to bring your loan current or make an alternative agreement once the sale date is set.


Short-Term Options for Delinquency or Default

Budget Counseling and Repair - This strategy involves changing your other debts and/or lifestyle to provide more financial resources for your mortgage debt. These changes might include eliminating unnecessary expenses, selling assets, using cash in retirement accounts, finding additional sources of income, or borrowing from family or friends.

Reinstatement - This option involves agreeing to a lump sum payment of the amount owed to your mortgage servicer to be paid by a specific date.

Forbearance Agreement - This is a formal written repayment agreement between the borrower and the mortgage servicer with a schedule of payments to gradually eliminate the present delinquent amount.

Repayment Plan - This plan requires agreeing to a temporary increase in monthly payments until the loan is brought current.

Interest Rate Freeze or Temporary Suspension of Rate Increase - If you have an adjustable rate mortgage (ARM) that is about to adjust upward, a temporary rate freeze may be an option for you.


Long-Term Options for Delinquency or Default

Loan Modification with Current Lender - One or more terms of the loan may be permanently changed to bring the loan current.

Re-Finance (Re-Fi) With Current or Different Lender - This option will require you to pay new loan origination fees. Beware of "teaser" rates on Re-Fi offers that quickly convert to significantly higher rates.

Reverse Mortgage for Homeowners 62 or Older - This option is a loan against the equity in a home that provides tax-free cash advances and does not have to be repaid while the homeowner lives in the home.

Sale - If the sale price exceeds the loan value and can be accomplished prior to the foreclosure sale date, the lender's permission is not required.

Assumption - The property is transferred to a new buyer who assumes the loan and takes responsibility for the mortgage. Make sure it is genuine and not just an equity stripping scheme that takes away your ownership but leaves you financially responsible for all or part of the original debt.


Additional Long-Term Options

The following options also exist but note that these choices will impact your future credit.

Short Sale - In this type of sale, the property is sold for less than the total mortgage owed. The lender must give advance permission in order to receive a full cancellation of the loan obligation. There may be negative tax consequences and special counseling may be required.

Deed-in-lieu of Foreclosure - The borrower agrees to deed the property to the servicer in exchange for a release from all mortgage obligations.

Bankruptcy - This option will require advance counseling and fees for attorneys or other services before a case is filed in the bankruptcy court. Bankruptcy will only stop the foreclosure process for a limited time and is usually only worth considering if you need time to access another solution such as a reverse mortgage or if you have substantial other debts. There are other significant negative impacts which should be discussed with a bankruptcy expert.


Project Sentinel encourages you to be proactive in your quest to prevent foreclosure. Consider your options carefully. Discuss your situation honestly with your family. Pursue counseling or other loss mitigation options, and seek timely legal advice if appropriate.

Regardless of who contacts the lender, you will need to pull together a packet of information including: a written hardship letter, financial statement(s), current bank statement(s), current pay stub(s) or other proof of income, and your most recent tax return.

For assistance with foreclosures in the Bay Area, contact Project Sentinel's HUD Certified Housing Counseling at 408-720-9888 or 1-888-331-3332 or any of the resources below.
- Neighborhood Assistance Corporation of America NACA 510-652-6622
- National Community Reinvestment Fund 202-628-8866
- FHA Secure 800-225-5342
- Home Ownership Preservation 1-888-995-4673
- HOPE Now 1-888-995-4673
- Department of Corporations 1-866-275-2677
- Department of Real Estate 916-227-0864
- Property Tax Relief or Deferral Program 1-800-952-5661


By Christine LaBadie, FRC Core Team