The Federal Housing Administration (FHA) insures mortgages for homeowners who may not qualify for traditional mortgages. While a conventional mortgage and an FHA-insured mortgage have many similarities, they also have some differences that homeowners should be aware of before committing to a long-term contractual agreement. The information you find on the internet for stopping a conventional foreclosure may not relate to a Federal Housing Administration foreclosure. Also, FHA loans have specific loss-mitigation guidelines and usually offer a pre-foreclosure period, which is not offered with conventional foreclosures.
Knowing how the FHA pre-foreclosure process works and which loss mitigation options are available to you in your particular situation could help you in the long run when it comes to stopping an FHA foreclosure.
Joshua Denbeaux is a New Jersey loan modification and foreclosure attorney. If you’re struggling to make your mortgage payments, an attorney may be able to help you negotiate with your lender to find a loss mitigation option that works for you. Contact us today to learn more about how we may be able to help you through the loss mitigation process.
What Is An FHA Loan?
An FHA loan is a mortgage backed by the Federal Housing Administration that traditional lenders offer. FHA loans typically offer a low down payment, low closing costs, and less stringent credit requirements than conventional mortgages.
Lenders view FHA loans as less risky because the FHA insures them. This backing means that the lender would face less risk if the mortgage were to default.
FHA loans have loss mitigation guidelines that list options for homeowners with FHA-insured loans. The FHA modification guidelines also include options to help homeowners adjust their mortgages to make payments more affordable and options to avoid foreclosure if keeping the home isn’t an option, such as a pre-foreclosure sale or a deed-in-lieu of foreclosure.
FHA Loan Foreclosure Process
Like a traditional mortgage, a borrower with an FHA mortgage will receive a Notice of Intent (NOI) to foreclose when they default on paying their monthly mortgage payments.
The difference between a traditional mortgage and an FHA mortgage in these scenarios is that the NOI will kickstart the FHA’s pre-foreclosure process. During an FHA pre-foreclosure period, the borrower has the chance to sell their home and other options to pay for the remaining mortgage loan that they owe their mortgage company.
One benefit of the FHA pre-foreclosure program is that even if the homeowner cannot sell their property for the amount they need to pay off the remaining mortgage, the borrower’s debt is still considered satisfactory. That means you won’t have to deal with deficiency judgments like you would with a traditional mortgage.While this could mean that selling your home may be a good option to stop foreclosure, you may lose the equity you’ve built up in your home and hurt your personal finances in the long term. Instead of decidi
How to Stop an FHA Foreclosure
If you’re at risk of foreclosure, FHA loss mitigation guidelines require lenders to offer you FHA loss mitigation options to help you keep your home. Some of the most common FHA loss mitigation options include:
FHA Loan Modification
A loan modification allows you to modify the original loan you owe to your mortgage lender. That could include reducing the interest rate, splitting the payment into smaller installments, or extending the loan term to lower monthly payments.
With a loan modification, overdue payments may be added to your loan balance. This means that your overdue payments are turned over, so you still owe them as part of your total loan, but they’re no longer overdue.
FHA Special Forbearance
A special forbearance is a type of FHA loan deferment, specifically for homeowners with FHA loans. In an FHA special forbearance, a lender can provide a temporary reduction or suspension of your mortgage payments to give you time to overcome or navigate through the life event that has temporarily reduced your income.
When granted a special FHA forbearance, you may be offered a payment plan to pay back the missed mortgage payments until you’re up to date on your mortgage. Without a payment plan, you are typically expected to pay back the total forbearance amount at the end of the forbearance period.
Extended forbearance periods may be provided to borrowers who are unemployed and actively seeking employment.
FHA Partial Claim
A partial claim is a loss mitigation option only offered with FHA loans. With a partial claim, a borrower receives a second loan in the amount necessary to bring their delinquent loan current. The second loan in a partial claim is interest-free and doesn’t need to be repaid until you pay off your first mortgage or sell your home.
FHA Home Affordable Modification Program (FHA-HAMP)
An FHA-HAMP combines a partial claim with a loan modification. The partial claim includes the second loan amount needed to bring your mortgage current, but can also include a larger amount to reduce your existing loan balance by up to 30%.
After getting the second loan, your reduced mortgage amount will be modified. The mortgage modification in an FHA-HAMP is the same as a traditional modification. The mortgage will be altered to lower your monthly payment amount.
Pre-Foreclosure Sales Program.
The sales program aims to help homeowners with an FHA mortgage loan who are in default. Under this program, the homeowner can sell their home to satisfy the loan debt even if the proceeds don’t cover the remaining balance owed.
Work With A Trusted NJ Foreclosure Defense Attorney
Whether you are trying to stop a traditional foreclosure or an FHA foreclosure, the process can be complicated and risky to take on by yourself. Without the right experience or resources, you risk the possibility of losing your home or losing the equity you’ve already built up in your home.
Denbeaux & Denbeaux Law is a trusted New Jersey foreclosure defense law firm committed to helping our clients through the foreclosure process and defending their homeowner rights.
We’ve seen firsthand how mortgage companies take advantage of homeowners during a very vulnerable and confusing time in their lives. With a foreclosure lawyer, you can have peace of mind knowing that someone with your best interests in mind is defending you and your home.
Looking for a foreclosure defense attorney to help you and your particular situation?Schedule a free consultation today to find out how Joshua Denbeaux may be able to help find the best solution for stopping traditional and FHA foreclosures and may be able to help find the best solution for stopping traditional and FHA foreclosures.
