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

HUD-approved housing counselors provide foreclosure avoidance counseling and assistance in applying for a mortgage workout—all at no cost to you. If you're facing a foreclosure, the sooner you talk to a housing counselor, the better. You can have no better advocate if you're trying to work out a loan modification or other loss mitigation option.

Read on to find out what a HUD-certified housing counselor can do for you, whether using one is likely to help you avoid a foreclosure, and how you can find a counselor in your area.

What HUD-Approved Housing Counselors Do

Housing counselors act as your advocate if you’re trying to avoid a foreclosure. These counselors are paid through government grants and, in some cases, grants from major mortgage lenders. They’re well trained in the various ways you might be able to prevent a foreclosure.

Your HUD-approved housing counselor can help you assess your loan situation and work with your servicer to try to find an option that will keep you in your house, if possible, like completing a modification or through a refinance program. (To learn what to do, and what not to do, in the modification process, see Do's and Don'ts for Getting a Loan Modification.)

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. (To learn what to do—and what not do—if you’re facing a foreclosure, see Foreclosure Do's and Don'ts.)

How Housing Counseling Works

When you call a HUD-approved counseling agency, you’ll be scheduled for an interview by phone or in person with a counselor. During the counseling session, the housing counselor will likely:

• discuss your current financial situation
• evaluate your current spending
• help you to figure out a budget that will set the maximum amount you’re able to pay towards 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
• give a recommendation on proposed next steps.

At the meeting, the counselor will want to get a handle on your overall financial situation, including your income, your debts, your assets, your mortgage, and the value of your home. So, before the appointment, it’s a good idea to gather up information about your finances, including:

• recent billing statements for your first and any other mortgages
• recent 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 Modification or Other Option

Once you, or your housing counselor, call your servicer asking for a way to avoid foreclosure, the servicer will send you a loss mitigation package. You’ll fill out and return the forms with the help of your counselor. Then, the servicer will review your income, debt, and hardship to determine whether you’re eligible for a foreclosure avoidance option. (Learn ten steps you can take to prevent a foreclosure.)

Can a HUD-Approved Housing Counselor Always Help?

Housing counselors can do a lot, but they’re limited by the servicer and investor (loan owner) policies regarding what are termed loss mitigation guidelines. This means you might not qualify for a mortgage workout no matter what you or the counselor does.

Still, even if you think you won’t qualify for a modification or other 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 law, and some state laws, a servicer can’t start or continue with a foreclosure while your completed application is pending.) You might end up getting a more affordable mortgage payment for the future or qualify for a workout option that you hadn’t previously considered.

How to Find a HUD-Approved Housing Counselor

The federal Department of Housing and Urban Development (HUD) has a list of approved counselors. To find a counselor near you, go to 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) or
• the Consumer Financial Protection Bureau (CFPB) at 855-411-CFPB (2372).

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

When to Talk to an Attorney

If you have questions about how the foreclosure process works in your state or you think you might want to fight the foreclosure in court and need to find out whether you have any defenses to a foreclosure, consider talking to a lawyer.