Government Programs and Strategies for Avoiding Foreclosure

The journey of homeownership can sometimes hit turbulence, particularly when facing the risk of foreclosure. Foreclosures are currently on the rise, so if you're struggling with your mortgage, you aren't alone. This guide offers a detailed exploration of government programs and strategies to help you navigate these challenging times.

To move forward, it is important to be aware of various options. These include government foreclosed homes, government foreclosures, financial assistance for difficulties, mortgage pause, and mortgage rescue.

Understanding Foreclosure and Government Foreclosed Homes

Foreclosure is when a lender takes a property because the homeowner didn't pay their mortgage. This situation can arise for reasons like job loss, unexpected medical expenses, or economic downturns.

The U.S. government often acquires foreclosed homes and sells them publicly. HUD, VA, and USDA sell government-foreclosed homes, giving chances to buyers interested in purchasing these properties.

Strategies to Avoid Foreclosure

• Assess Your Financial Situation. Review your budget and consider income and expenses. This step is important for knowing how much you can spend on your mortgage and finding ways to save money.
• Communicate with Your Lender.  Contact your lender immediately if you're facing challenges. Most lenders prefer to avoid foreclosure and may offer solutions to help you keep your home​​​​.
• Loan Modification.  If you are struggling to make your loan payments, you may be able to get help from your lender. They may be willing to modify your loan terms by lowering the interest rate or extending the repayment period. This could make your payments more manageable and help you avoid defaulting on your loan. Here are some tips for asking your lender to modify your loan terms:

• Be prepared to provide information about your financial situation. This may include your income, expenses, and debts.
• Explain why you are struggling to make your payments.
• Be specific about the changes you want to see in your loan terms.
• Be willing to negotiate.
• Be prepared to walk away if your lender is not willing to help.
• Explore Forbearance Options.  Mortgage forbearance programs offer temporary relief by pausing or reducing your payments. Keeping in mind that you will eventually need to catch up on these payments is important.
• Bankruptcy as a Last Resort.  Bankruptcy can temporarily halt the foreclosure process. Chapter 13 allows for debt restructuring, while Chapter 7 provides a temporary stay but doesn't prevent eventual property loss.
• Chapter 13 bankruptcy allows you to keep your home and other assets by repaying debts over time through a court-approved plan.
• Chapter 7 bankruptcy, on the other hand, allows you to discharge your debts and start fresh. However, if you file for Chapter 7 bankruptcy, you may lose your home if you have too much equity in it.
• If you are considering bankruptcy, speaking with an attorney to discuss your options is important.

Mortgage Moratorium and Mortgage Bailout Programs

• Mortgage Bailout.  The Federal Housing Finance Agency (FHFA) offers mortgage assistance for homeowners impacted by housing instability. Initiatives and organizations such as Fannie Mae, Freddie Mac, and the Federal Home Loan Banks provide this.
• Mortgage Moratorium.  From 2020 to 2023, the CARES Act allowed some homeowners to temporarily stop making mortgage payments. At the end of the pause, approved homeowners don't have to pay a large sum of money. Note: After May 31, 2023, homeowners can no longer apply for COVID-related mortgage forbearance.
• Federal Housing Administration (FHA) Forbearance.  Starting June 1, 2023, homeowners should contact their mortgage provider to explore the FHA's standard forbearance options. These options remain available to homeowners who didn't apply for pause payments under the CARES Act.

Beware of Mortgage Relief Scams

Being vigilant against scams during times of financial hardship is important. Be wary of companies that demand upfront fees, promise guaranteed loan adjustments, or ask for property title transfer.

These are all common red flags that a company may be trying to scam you. If you are unsure about a company, do your research and talk to a financial advisor first.

Here are some additional tips to help you avoid scams:

• Never give personal information, such as your SSN or bank information, to someone you do not know and trust.
• Be suspicious of any offer that sounds too good to be true.
• Do not click on links in emails or text messages unless you know the sender and are expecting to hear from them.
• Use a strong password and change it regularly.
• Keep your computer and software up to date with the latest security patches.
• Be aware of the latest scams and how to protect yourself from them.

If you think you have been a scam victim, you should immediately report it to the authorities. Always consult a lawyer or a HUD-approved housing counselor before signing any documents​.

Summary

Facing foreclosure can be daunting, but it's possible to navigate these challenges with the right information and action plan. The best options include government programs, mortgage forbearance or adjustments, and other government-provided options.

Open communication with your lender is extremely important during these times. Maintaining financial stability also requires careful financial planning and awareness of potential scams.

Need help with foreclosures in Colorado Springs? Best CS Homes has you covered with expert assistance. Our foreclosure experience comes from decades of supporting our community when they need it most.

We'd love the opportunity to guide you through this tough time and help you move forward with your finances in check. Just tell us how to contact you using the form below!