Many homeowners will face financial difficulties at some point during their life. Unemployment, medical problems, and divorce are just a few scenarios that can cause a homeowner miss mortgage payments. The threat of foreclosure and potentially losing a home is a stressful, even terrifying prospect for homeowners and their families. Too many homeowners choose to avoid such stress by refusing to communicate with their mortgage servicer. But ignoring the servicer isn’t a good idea.
To learn why you should keep the channels of communication open, read on.
A homeowner should never ignore calls, mail, or other attempted communication from their mortgage servicer. In fact, homeowners should be proactive in contacting their servicer, in addition to being responsive. Failing to establish and maintain communication with the mortgage servicer might result in missed information, lack of awareness about dates and deadlines, and, most importantly, might cause the homeowner to lose opportunities to save the home.
Homeowners should contact their servicer as early as possible, preferably before missing their first payment, and immediately after any missed payment. The homeowner shouldn’t wait for the servicer to make contact.
Why the homeowner should be proactive. Being proactive gives the homeowner the earliest, most affordable shot at working something out with the servicer. Costs will begin adding up after the homeowner falls behind in payments (called “defaulting” on the loan), particularly once the servicer officially starts a foreclosure. An active, involved homeowner can also help motivate the servicer towards finding a solution, rather than simply becoming an anonymous part of a standardized process.
How to find contact information for the servicer. Homeowners can find the servicer’s contact information on their mortgage statement or online. (Learn more about how to find out who owns your mortgage and who services it.)
Servicers can sometimes work with homeowners who are facing financial problems, especially if it is the first instance of nonpayment. Rather than simply missing payments and triggering the servicer’s standard foreclosure process, it’s far better to contact the servicer and ask if they can offer any workout options, like a temporary forbearance or modification.
Forbearances. With a forbearance, the servicer may allow the homeowner to skip or make reduced payments, generally for a period of no more than six months. This break from payments can be helpful in a short-term financial crisis. Though, the homeowner has to make up any shortfall once the forbearance ends. Whether a homeowner will qualify for a forbearance will depend heavily on the homeowner’s circumstances, past payment history, and servicer.
Loan modifications. A modification changes the terms of a homeowner’s loan, generally because of a long-term change in the homeowner’s income or ability to pay. The homeowner can discuss modifying the loan with the servicer before or after the first missed payment, but earlier is always better. Homeowners should begin discussions as soon as a change in circumstances occurs that might make repayment difficult or impossible. (To learn about forbearances, modifications, and other options for avoiding foreclosure, see Avoiding Foreclosure: Basic Workout Options.)
Under state and federal laws, the servicer has to contact the homeowner at various stages after default and during the foreclosure process. Mandatory communication by the servicer serves several purposes, including:
If the homeowner refuses to answer phone calls, read the mail, or accept other efforts to communicate, he or she might never receive this vital information. Deadlines for opportunities to avoid foreclosure, like the opportunity to participate in mediation or to submit an application for a loan modification, might be missed. The possibility of catching up might fade away as attorneys’ fees and court costs add up. Even if foreclosure is inevitable, the homeowner might be surprised by events if he or she isn’t aware of dates and procedures. For these reasons, homeowners who want to keep their home should respond to communication from the mortgage servicer, in addition to contacting the servicer proactively.
While communicating with the servicer is extremely important, the homeowner should be very cautious about communicating with anyone other than the servicer, the attorneys handling the foreclosure, or a HUD certified counselor (see below).
Homeowners in default and foreclosure will likely be targeted by numerous third-party debt counselors and other solicitors offering mortgage help or modification assistance. These offers might be fraudulent or come from companies more interested in profit than helping the homeowner. (To learn more about scammers who target homeowners who are facing a foreclosure, see Foreclosure Rescue Scams to Avoid.)
Homeowners seeking unbiased assistance can contact the HOPE Hotline at 888-995-HOPE. The HOPE Hotline connects homeowners with HUD certified housing counselors. If you have questions about foreclosure procedures in your state or want to learn about possible foreclosure defenses, consider talking to a local attorney.