The Federal Housing Administration is the largest insurer of mortgages in the world, according to its website. The agency, which is a part of the U.S. Department of Housing and Urban Development (HUD), said in June 2010 that it had insured loans on more than 34 million properties. The FHA, with help from HUD, also assists homeowners in danger of losing their FHA-insured homes to foreclosure.
Foreclosure Avoidance Counseling
HUD-approved housing counselors are available to assist all homeowners with foreclosure issues. The counselors are trained in foreclosure avoidance, and are available by telephone and face-to-face. Although the counselors will help any homeowner, special attention is provided for homeowners with FHA-insured loans. Call the FHA National Servicing Center at 888-297-8685 to get help with FHA-insured loans. Trained counselors will describe options for avoiding foreclosure on an FHA loan and if necessary will contact the lender on a homeowner's behalf.
Reinstatement
HUD recommends several solutions for avoiding foreclosure, including reinstatement. Reinstatement allows you to make up missed payments by paying a lump sum within a certain date. Your lender will temporarily bring your account current--and stop the foreclosure process--while giving you time to come up with the money. The lender has to voluntarily agree to the program, but may be more likely to do so if HUD is making an appeal on your behalf.
Forbearance
Your lender can use a process called forbearance to reduce or even suspend your payments for a short period of time while you recover from a financial setback. Usually, a forbearance option is combined with a reinstatement. For example, your monthly mortgage payment could be reduced by 50 percent through forbearance with a reinstatement option, giving you several months to make up for missed payments with a lump sum. In the meantime, the foreclosure process would be stopped if the lender agrees.
Repayment
Repayment plans are also endorsed by HUD. With repayment, you make up missed payments by paying a little extra each month and the lender voluntarily agrees to stop the foreclosure.
Mortgage Modification
Homeowners can also see mortgage modification to stop a foreclosure. The lender can agree to change terms of your loan to make the payments more affordable. Modifications could include a lower interest rate and changing the loan from an adjustable rate mortgage to a fixed mortgage. Missed monthly payments that led to the foreclosure process could be tacked onto the end of the loan. Monthly payments could be further reduced by extending the loan by several years.
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