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www.nhregister.com/site/news.cfm?newsid=13809023&BRD=1281&PAG=461&dept_id=517515

24 January 2005

House keeping

Maria Garriga, Register Staff

If owning a home is the American dream, then making mortgage payments while having financial problems qualifies as the American nightmare.

The foreclosure listing for New Haven doesn’t include the reasons — job loss, medical bills, profligate spending — people fail to keep up with their mortgage payments. It just reveals the names of those soon to be evicted from the American dream.

"We’ve seen (mortgage) default rates rise statewide, but an increase in (these) homeowners staying in their homes," said Julie Fagan, director of the federal Housing and Urban Development office in Hartford.

Homeowners have a variety of options to help them keep their homes when they have financial struggles, Fagan said.
 
First, do not ignore letters from the mortgage lender. Call the lender’s loss mitigation department and explain the situation, she said.

Be prepared to offer a statement of income and expenses to help the lender determine which program is best to help avoid foreclosure.

Second, "stay in your home," Fagan emphasizes. Homeowners who leave their homes may not qualify for programs that protect them from foreclosure.

Third, get in touch with a HUD-approved free housing counselor at (800) 569-4287 or TDD (800) 877-8339.

Lenders offer programs such as special forbearance, mortgage modification, and a HUD partial claim.

In a special forbearance, the mortgage lender temporarily reduces the payment total based on the homeowner’s financial situation. The lender may also offer a temporary suspension of payment, Fagan said.

In the mortgage modification program, the lender alters the terms of the mortgage to make it more affordable. In this program, a lender may stretch out the years of payment to lower monthly payments.

A lender can also help a homeowner with a Federal Housing Administration-backed mortgage by filing a partial claim with HUD.

HUD will pay the lender enough to bring the mortgage current, and place a lien on the house.

But the homeowner must give HUD a promissory note for repayment, making a partial claim essentially an interest-free loan from HUD that must be repaid upon sale of the property.

If the homeowner cannot get into one of these programs, Fagan suggests two other alternatives — a pre-foreclosure sale or giving the lender the deed to the home in lieu of foreclosure.

Although a homeowner must sell the home to prevent foreclosure in a pre-foreclosure sale, the sale may shield his or her credit from damage, Fagan said.

"That would be better than losing your credit, which would stop you from getting a new house," Fagan said. "You want to do everything to protect your credit."

If all else fails, you may volunteer to give up your house to the lender by giving the lender the deed to the house before the foreclosure takes place.

That saves the lender’s time and the homeowner’s credit rating.

All of these alternatives should be discussed with the lender’s loss mitigation department and a HUD-approved housing counselor, Fagan said.

Fagan also warns the agency has seen a surge in the number of scam artists preying on homeowners by offering to help them avoid foreclosure.

Fliers posted in the city often urge homeowners to sell their homes for "quick cash."

That may appeal to homeowners trying to avoid foreclosure. But before agreeing to sell a house, sellers should check out the buyer with the state attorney general’s office, the state Real Estate Commission, or the state’s attorney’s fraud unit to see if complaints have been lodged against the buyer.

"We know New Haven has a problem with predatory lenders," said Sharon Reuss, a spokeswoman for the Center for Responsible Lending in North Carolina, which tracks predatory lending. "Never sign over a deed before you have paid off the mortgage."

In the most typical scam, a buyer approaches a homeowner in financial distress and offers to make the mortgage payments and split proceeds from the sale of the property.

"They often try to make the homeowners move out quickly," she said.

The con artist never makes the mortgage payments but rents out the property to tenants until the mortgage lender forecloses. The foreclosure damages the homeowner’s credit rating and the tenants lose their home.

Homeowners should also avoid any business that charges them for housing counseling or services to prevent foreclosure. Homeowners can get those services for free from HUD-approved agencies.

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Maria Garriga can be reached at mgarriga@nhregister.com or 789-5685. 




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