Get Help Avoiding Foreclosure: Using a HUD-Approved Housing Counselor

If you're facing a foreclosure, the sooner you talk to a HUD-approved housing counselor, the better. A housing counselor can provide foreclosure avoidance counseling and assistance in applying for an alternative to foreclosure, all at no cost to you.

You can have no better advocate if you want a loan modification or another loss mitigation option.

What Is a HUD-Approved Housing Counselor, and How Can They Help Me?

A HUD-certified housing counselor is a housing counselor who has passed the HUD Certification examination, works for a participating agency, and is certified by HUD as competent to provide housing counseling services. (24 C.F.R. § 214.3.)

Housing counselors are well-trained in the various ways you might be able to avoid a foreclosure. Your HUD-approved housing counselor can help you assess your loan situation and work with your servicer to find an option that could keep you in your house, like completing a modification or through a refinance program.

If you decide you want to give up the home, a counselor might be able to help you arrange a short sale or deed in lieu of foreclosure. A counselor can also give you information about these options.

Foreclosure Prevention Counseling Is Free

HUD-approved housing counselors are paid through government grants and, in some cases, grants from major mortgage lenders. Foreclosure prevention counseling is available free of charge.

What Is a HUD-Approved Housing Counseling Agency?

A HUD-approved housing counseling agency is a private or public nonprofit organization exempt from federal taxation and approved by HUD. The agency must act under federal guidelines and laws when providing housing counseling services to clients directly or through their affiliates or branches. (24 C.F.R. § 214.3.)

How HUD-Certified Housing Counseling Works

When you contact a HUD-approved counseling agency, you'll be scheduled for an interview, typically by phone or in person with a counselor. With some agencies, you can meet online. (24 C.F.R. § 214.300.)

During the counseling session, the housing counselor will likely:

• discuss your current financial situation
• evaluate your current spending habits
• help you to figure out a budget that will set the maximum amount you're able to pay toward your mortgage each month
• explore the reasons why you fell behind in payments, which are usually the basis for a hardship letter or affidavit
• help you figure out what options are best for you, and
• recommend your next steps.

The meeting will probably take around 60-90 minutes. The counselor will use the information you provide to develop an action plan. (24 C.F.R. § 214.300.)

Paperwork You Need When You Talk to a HUD Housing Counselor

At the meeting, the counselor will want to get a handle on your overall financial situation. They'll ask about your income, debts, assets, mortgage, and home value.

So, before the appointment, it's a good idea to gather information about your finances, including:

• recent billing statements for your first mortgage and any other mortgages
• current pay stubs and other documentation showing any income you receive (if you're self-employed, an up-to-date profit and loss statement)
• recent tax returns
• monthly household expenses
• account balances and monthly payments due on all of your credit cards, student loans, car loans, and so on, and
• information about your savings and other assets.

Applying for a Loan Modification or Another Loss Mitigation Option

Once you or your housing counselor call your servicer and ask for a way to avoid foreclosure, the servicer will probably send you a loss mitigation package. You'll fill out and return the forms with the help of your counselor.

The servicer will review your income, debt, and hardship to determine your eligibility for a foreclosure avoidance option. Your counselor might even work with the mortgage servicer on your behalf throughout the process.

Can a HUD-Approved Housing Counselor Stop a Foreclosure?

One study showed that homeowners who work with housing counselors are almost three times more likely to avoid foreclosure through a mortgage modification or another option than those who don't. Still, while housing counselors can do a lot, they're limited by the servicer and investor (loan owner) policies, called "loss mitigation guidelines." These guidelines outline the rules and eligibility requirements for modifications and other options. So, you might not qualify for an alternative to foreclosure, no matter what you or the counselor do.

But even if you think you won't qualify for a modification or a different foreclosure alternative, it certainly doesn't hurt to talk to a counselor and submit a loss mitigation application to your servicer. You can apply for loss mitigation either before the foreclosure officially starts or after a foreclosure has already started. Under federal and some state laws, a servicer can't start or continue with a foreclosure while your completed application is pending.

You might get a more affordable mortgage payment for the future or qualify for a loss mitigation option you hadn't previously considered.

How to Locate an Approved HUD-Certified Housing Counselor Near You

The federal Department of Housing and Urban Development (HUD) has a list of approved counselors. To find a counselor near you, visit HUD's website or call 800-569-4287.

You can also find a counselor by:

• calling the HOPE Hotline, open 24 hours a day, seven days a week, at 888-995-HOPE (4673)
• going to the Consumer Financial Protection Bureau (CFPB) "Find a housing counselor" website
• searching HUD's Office of Housing Counseling web page using either a map or by entering your zip code, or
• in some areas, using HUD's iPhone app, called "HUD Counselor Locator," which is available for free at Apple's App Store.

When to Talk to a Foreclosure Attorney

If, even after reading about the benefits of using a HUD-approved housing counselor, you decide not to use one, be sure that you understand the different types of available loss mitigation options before you talk to your servicer about ways to avoid a foreclosure.

Also, you might need to talk to a foreclosure lawyer if you're facing an imminent foreclosure or have received legal papers. A lawyer can answer questions about how the foreclosure process works in your state, explain how to fight the foreclosure in court, and tell you whether you have any defenses to a foreclosure.