Perkerson Civic Association

What Is Foreclosure?/Save Your Home

[This information compiled from the "Treasury.gov" and "Neighborhoodlink.com" websites]

What is Foreclosure?

In order to purchase your house you probably had to borrow money from lending institution (bank, mortgage company, etc). When you signed the load documents you agreed that in the event you cannot make your mortgage payments, the lender has the right to foreclose: take ownership, sell the property, and keep the proceeds in order to repay the loan.

If, perchance, the sale price of your property does not cover the amount you owe, a deficiency judgment could be pursued against. Both the foreclosure and the deficiency judgment will significantly impact your ability to secure credit in the future.

Missing a monthly mortgage payment, technically puts you in default of your mortgage. The laws vary by state, but typically a loan that is late by at least 90 days can be determined to be in foreclosure. The lender files a public default notice, called a Notice of Default or Lis Pendens.

The timeline will vary by state, but here is how it happens.

Your first missed payment: Your lender will contact you by letter or phone.
Second consecutive missed payment: - Your lender will probably begin calling to find out the reasons why you have missed two consecutive payments. It is important that you speak with your loan officer! Describe your situation, no matter how difficult and try to find a solution to try and resolve it.
Third consecutive missed payment: When three consecutive payments have been missed, you will receive a letter from you lender stating the amount you are delinquent, and that you have 30 days to bring your mortgage current. This is called a "Demand Letter" or "Notice to Accelerate". If you do not pay the specified amount or make some type of arrangements by the given date, the lender may begin foreclosure proceedings. They are unlikely to accept less than the total due without arrangements being made if you receive this letter. There is still time to work something out with your lender.
Fourth consecutive missed payment: By now there is very little time left before the deadline stated in your Demand or Notice to Accelerate Letter. When the 30 days ends, if you have not paid the full amount or worked our arrangements you will be referred to your lender's attorneys. You will incur all attorney fees as part of your delinquency.

The final step is a Sheriff's or Public Trustee's Sale. The lender's attorney will schedule a sale of your property. Technically, this is the actual day of foreclosure. You may be notified of the date by mail, a notice is taped to your door, and the sale may be advertised in a local paper. The time between the Demand or Notice to Accelerate Letter and the actual Sale varies by state. In some states it can be as quick as 2-3 months. This is not the move-out date. You have until the date of sale to make arrangements with your lender, or pay the total amount owed, including attorney fees.

After the sale date, you will enter a redemption period. You will be notified of your time frame on the same notice that your state uses for your Sheriff's or Public Trustee's Sale.

If you are facing the possibility of foreclosure, there are two important questions that you need to ask yourself:

Did you miss making your mortgage payments because of a short term financial situation?
Did you purchase a property that you simply cannot afford?

If the answer to question #1 is "Yes," you have options to prevent foreclosure and work out a solution with your lender. If, however, the answer to question #2 is "Yes," then you should take the necessary steps to sell the property and not simply let the property go into foreclosure.

Loan Modification: Is it Right For You?

What is loan modification? How is it different than refinancing a mortgage and what does it take to qualify for a lenders loan modification program.

What is loan modification?

President Obama recently announced a $75 billion initiative called the Homeowner Affordability and Stability Plan (HASP). The main thrust of the plan is to reduce monthly mortgage payments for people with loans held by entities other than Fannie Mae or Freddie Mac. Full details of the plan were released on March 4, 2009 and the basics of the plan are centered on a loan modification program.

Loan modification programs are typically designed for homeowners who are having difficulty making their mortgage payment, but who can't qualify to refinance their mortgage. A loan modification is different than a refinanced mortgage which trades in one mortgage for another one. It also differs dramatically from foreclosure, a short sale, or a deed in lieu.

A loan modification usually involves reducing the underlying interest rate and in many cases it means converting the mortgage from an adjustable rate mortgage (ARM) to a fixed rate mortgage. Other modifications can also include extending the term of the loan (for example from 30 to 40 years) and/or adding missed payments to the loan balance. The bottom line is that a loan modification is intended to reduce the payments for the borrower, make it more affordable, and reduce the risk that the homeowner will default on the loan.

Requirements for a Loan Modification

Anyone can initiate a loan modification with their lender even if they don't qualify under the HASP plan. The process starts by contacting your lender. Prior to contacting your lender you will need your recent bank statements, most recent mortgage statement, income information and documentation, and a letter from you demonstrating financial hardship—be prepared to show that your monthly mortgage payment is at least more than 38% of your total monthly income. Below is an outline of the basic requirements of the HASP Plan.

Loans must have originated on or before January 1, 2009.
Mortgages must be for a single-family residence with a loan balance no greater than $729,750.
Loans can only be modified once beginning March 4, 2009 through December 31, 2012.
Home cannot be vacant or condemned and must be a primary residence—not investor owned.
Interest rate can be lowered to as low as 2 per cent and the term of the mortgage can be extended to a maximum of 40 years in order to maximize the reduction in loan payment.
Borrowers will need to provide an "affidavit of financial hardship", their most recent tax return, and two recent pay stubs.
Service providers will be required to follow a sequence of steps that modify the loan in order to reduce the monthly loan payment to no more than 31% of gross monthly income.
Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years

Unfortunately lenders and HUD counselors have been flooded with requests for help, thus making it more difficult to find free help from a housing or credit counselor. If you decide to use a fee based service, your best bet is a recommendation from someone you trust like a family member. Even with a trusted recommendation, avoid paying fees in advance, try to find a service where the fee is based on results, and avoid any service that wants you to make your mortgage payments to them instead of your lender.

This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.

The Homeowner Affordability and Stability Plan (HASP)

Falling house values have been at the forefront of the current financial crisis.

The Homeowner Affordability and Stability Plan HASP is an ambitious program by the Obama administration to address the mortgage crisis. It entails $75 billion in direct spending a $200 billion invested in Fannie Mae and Freddie Mac.

President Obama's hope is that it will help 7 - 9 million current homeowners.

What Exactly is HASP - Affordability Housing?

It's a plan to keep a specific subset of current ‘at risk' homeowners in their homes and avoid foreclosure. It's a complicated plan the details of which were recently released March 4^th. Basically the government will spend $275 billion to entice lenders to agree to these new rules and enticements to homeowners themselves to act responsibly.

Two groups of people would benefit directly from the President's plan.

Homeowners who are in poor financial situations (troubled borrowers), who may be delinquent on their mortgage payments, who have monthly mortgage payments that exceed 38% of their pre tax monthly income, and who are in immediate danger of losing their home.
Homeowners who are current with their mortgage payments but who have high interest rates, little or no equity, and can't refinance under current banking rules. It would be targeted at homeowners that pay 31% or less of pre tax income in mortgage payments and whose outstanding loan is not more than 105% of the value of their home.

HASP is Multi-pronged Approach

Along with the direct financial aid to homeowners, HASP would pump $200 billion into Freddie Mac and Fannie Mae to encourage lending and current mortgage renegotiating. It would give bankruptcy judges enormous power to force lenders to accept new mortgage terms - payments, principle amounts, interest rates, etc. (This part of President Obama's plan would require Congress to change current law.)

How Can You Get HASP Money?

Your lender will learn the details of this mortgage program on March 4^th. Once the details are publicly available you should stay in regular contact with your lender about your specific options. In the meantime, gather your financial documents.

File your 2008 taxes
Balance your checkbooks
Gather your pay stubs for the last 12 months
Gather your bank statements for the last 12 months
Add up your total debt (credit cards, car loans, student loans, etc) and your total minimum monthly payment on that debt

And remember

Loans must have originated on or before January 1, 2009.
Mortgages must be for a single-family residence with a loan balance no greater than $729,750.
Loans can only be modified once beginning March 4, 2009 through December 31, 2012.
Home cannot be vacant or condemned and must be a primary residence-not investor owned.
Interest rate can be lowered to as low as 2 per cent and the term of the mortgage can be extended to a maximum of 40 years in order to maximize the reduction in loan payment.
Borrowers will need to provide an "affidavit of financial hardship", their most recent tax return, and two recent pay stubs.
Service providers will be required to follow a sequence of steps that modify the loan in order to reduce the monthly loan payment to no more than 31% of gross monthly income.
Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years

Your Affordability Home

How much you can spend on a house is dependent on various factors: your income, how much you are qualified to borrow, your monthly expenses, and the amount of your down payment. Below are the two best mortgage calculator options; (sometimes called a home affordability calculator) they can provide a general idea of what you can afford, but it is always best to visit a lender and actually get pre-approved for loan as this will provide you exact numbers.

What Is A Short Sale?

Short sales are on the rise as foreclosure rates continue to mount. Why? Because homeowners, who have fallen behind on their mortgage payments and have seen the value of their homes drop below the purchase price, are turning to short sales as a way to avoid foreclosure.

In a short sale, the owner of a home and their mortgage lender agree to sell the home at a discounted price: less than the total amount owed to pay off the home loan. A lender will agree to a short sale if they believe that it will result in a smaller financial loss than will a foreclosure.

Why Would You Choose A Short Sale?

For the homeowner, there are three big advantages to a short sale: short sales appear on your credit report as "pre-foreclosure in redemption," not as "debt discharged due to foreclosure"; a short sale will probably not damage your credit, as much as a foreclosure; and, in many cases, the lender will agree to forgive the remainder of the loan.

Unlike a foreclosure, in which the lender takes ownership of the property and then sells it, with a short sale the owners sell the property, but do not receive any money from the sale. In a foreclosure, the owner could receive money from the sale if the sale price amount exceeds that of the outstanding loan and the lender has been paid in full.

Lenders will typically not agree to a short sale until the seller has missed at least three consecutive mortgage payments and has received a default notice. Lenders who were once adverse to take on short sales are agreeing to them now for a couple of reasons: first, do not like to have bad loans on their books and if there is an opportunity to sell the property without a huge loss, they will do it; second, lenders could lose a lot more money if the property goes to foreclosure and then to auction.

Buyers

For buyers, it is best to do a short sale once the notice of default (first step in foreclosure) has been recorded. At this point lenders become highly motivated and the likelihood of purchasing at a significant discount is good. Very rarely will a lender discount a mortgage prior to issuing a notice of default.

The type of house or its condition is irrelevant; all mortgages can be discounted if the lender believes it is in their best interest to do so. Historically, the ideal target properties for a short sale are the ones that need lots of work and repairs. Lenders typically offer more significant discounts on distressed properties.

Another ideal target property for short sale buyers are ones that are highly leveraged. Lenders holding a second mortgage will probably not see any return on their investment after a foreclosure auction. These lenders are typically agreeable to a short sale because they would rather receive some money on their loan rather than nothing.

Sellers

Here are a few pointers when considering entering into a short sale agreement with your lender.

Make sure you know and verify the value of your property.

Know what the closing costs will be.

Calculate the total amount owed to pay off your loan (remember to include the total of all loans against the property).

Before negotiating with your lender, do the math! Subtract the total amount you owe for your property from the net profit of the sale. This total is either: the amount you will still owe the lender; or, the amount the lender will need to forgive on your loan.

Contact the lender and inquire as to its procedures for a short sale. Depending on your situation, lenders will typically agree to work with you by reducing the amount owed.

What Is A Deed-In-Lieu?

There are unprecedented numbers of families faced with the possibility of foreclosure. A foreclosure-in-the-making situation looks something like this: you are financially strapped, have missed consecutive monthly mortgage payments, and have been unsuccessful in trying to sell your home to repay your loan.

If you are at the point of being willing to give up your home, but want to avoid foreclosure, you should be aware of two other options: short sale and deed-in-lieu of foreclosure transactions. You will still lose your home and negatively impact your credit rating by implementing either of these options, but they may be less painful than foreclosure.

Short Sale vs Deed-In-Lieu

The difference between a short sale and a deed-in-lieu of foreclosure transaction is determined by who is responsible for selling the property. In a short sale, you will be responsible for selling your house at a fair market value, even if it is less than the amount you owed on the mortgage. In exchange, the lender agrees to forgive the remainder of your loan.

In the deed-in-lieu of foreclosure transaction, you first give ownership of your property to the lender (with the lender's written consent) and the lender then assumes full responsibility for selling the house. Similar to a short sale, the lender will typically agree to forgive the remainder of your loan.

Short of filing for bankruptcy, which will delay but not stop foreclosure, a deed-in-lieu of foreclosure may be a good option for getting your finances back on track. A deed-in-lieu of foreclosure allows you sign over legal ownership to your home in exchange for the lender's agreement not to foreclose and to forgive the remainder of your debt. You may even receive more generous terms from the lender than you would in a formal foreclosure.

Better in the Long Run

A deed-in-lieu of foreclosure also might help your chances of getting another mortgage loan in the future, and it will definitely help avoid the lengthy legal process of foreclosure. Although it has a negative impact on your credit rating, deed-in-lieu of foreclosure is probably less harmful than a foreclosure.

The advantages to the lender include: the ability to receive title to the property immediately instead of having to wait for months for the foreclosure process to complete; significant financial savings on court costs and lawyers' fees; and, it enables them to resell the property so they can recoup some of their investment.

Before approving a deed-in-lieu of foreclosure transaction, the lender will require that your home be put on the market (listed with a real estate agent) for at least 30 days (three months is typical) and that there are no other liens on the property. Lenders would prefer that you sell the property rather than they assuming responsibility to sell it.

If you foresee, or are experiencing problems making your mortgage payments, contact a nonprofit organization that can help you negotiate with your lending institution.

What Will Happen?

The process for approving a deed-in-lieu foreclosure looks something like this. Both you and the lender will sign two legal documents, an agreement and a deed (warranty, quit claim, or a grant). The agreement describes the terms and conditions of deal including: a promise by the lender not to initiate foreclosure proceedings; a promise to terminate any existing foreclosure proceedings; and a promise to forgive any deficiency (the amount of the loan that isn't covered by the sale proceeds) that remains after the house is sold. The deed, gives legal ownership of the property to the lender.

The lender then confirms that your loan is "paid in full" and gives you two forms: One states that your debt is canceled; the other refers to the waiver of the right to a deficiency judgment (the lender's right to ask for the unpaid debt amount if it is not recovered totally by the sale of the property).

Taxable Income?

It is possible that a deed-in-lieu of foreclosure may generate taxable income based on the amount of your "forgiven debt. In other words, you might have to pay income tax on the amount of money remaining on your loan that was forgiven by the lender.

Here is why: You did not owe taxes on your original load because you were required to repay the loan (it was not a "gift"). However, when you agreed to not repay the entire amount of the loan, and the remainder of the debt was forgiven, the amount that was forgiven becomes "income" on which you owe tax.

The IRS is notified of this when the lender sends it IRS Form 1099C, which reports the forgiven debt as income to you.

However, there may be help. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home's value or the taxpayer's financial condition.

More information, including detailed examples can be found in Publication 4681 (http://www.irs.gov/pub/irs-pdf/p4681.pdf), Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17 (http://www.irs.gov/irs/article/0,,id=179073,00.html).

How To Avoid Foreclosure

The guidance below (and in the "How to Avoid Foreclosure" pamphlet) is applicable to homeowners with FHA Insured loans. While a good deal of this information may apply to all homeowners in danger of losing their homes, not all of the foreclosure avoidance tools mentioned may be available to you if you have a VA or conventional loan. Additionally, HUD/FHA does not have any Loss Mitigation oversight over VA or conventional loans. Please contact your lender or a housing counseling agency.

Q: What Happens When I Miss My Mortgage Payments?

Foreclosure may occur. This is the legal means that your lender can use to repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued. If that happens, you not only lose your home, you also would owe HUD an additional amount.

Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if possible.

Q: What Should I Do?

DO NOT IGNORE THE LETTERS FROM YOUR LENDER. If you are having problems making your payments, call or write to your lender's Loss Mitigation Department without delay. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help.
Stay in your home for now. You may not qualify for assistance if you abandon your property.
Contact a HUD-approved housing counseling agency nearest you. These agencies are valuable resources. They frequently have information on services and programs offered by Government agencies as well as private and community organizations that could help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.

Q: What Are My Alternatives?

You may be considered for the following:

Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.

Partial Claim. Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current.

You may qualify if:

your loan is at least 4 months delinquent but no more than 12 months delinquent;
you are able to begin making full mortgage payments.

When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development will pay your lender the amount necessary to bring your mortgage current. You must execute a Promissory Note, and a Lien will be placed on your property until the Promissory Note is paid in full.

The Promissory Note is interest-free and is due when you pay off the first mortgage or when you sell the property.

Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan.

You may qualify if:

the loan is at least 2 months delinquent;
you are able to sell your house within 3 to 5 months; and
a new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines.

Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but it is not as damaging to your credit rating as a foreclosure.

You can qualify if:

you are in default and don't qualify for any of the other options;
your attempts at selling the house before foreclosure were unsuccessful; and
you don't have another FHA mortgage in default.

Q: How Do I Know if I Qualify for Any of These Alternatives?

Your lender will determine if you qualify for any of the alternatives. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender.

Q: Should I Be Aware of Anything Else?

Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If you're selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your financial difficulty. Be especially alert to the following:

Equity skimming. In this type of scam, a "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.

Phony counseling agencies. Some groups calling themselves "counseling agencies" may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale. If you have any doubt about paying for such services, call a HUD-approved housing counseling agency. Do this before you pay anyone or sign anything.

Q: Are There Any Precautions I Can Take?

Here are several precautions that should help you avoid being "taken" by a scam artist:

Don't sign any papers you don't fully understand.
Make sure you get all "promises" in writing.
Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt.
Check with a lawyer or your mortgage company before entering into any deal involving your home.
If you're selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state's Attorney General, the State Real Estate Commission, or the local District Attorney's Consumer Fraud Unit for this type of information.

Q: What Are the Main Points I Should Remember?

Don't lose your home and damage your credit history.
Call or write your mortgage lender immediately and be honest about your financial situation.
Stay in your home to make sure you qualify for assistance.
Arrange an appointment with a HUD-approved housing counselor to explore your options.
Cooperate with the counselor or lender trying to help you.
Explore every alternative to keep your home.
Beware of scams.
Do not sign anything you don't understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.

Act now. Delaying can't help. If you do nothing, YOU WILL LOSE YOUR HOME and your good credit rating.

What is a Reverse Mortgage?

Reverse mortgages are a way for seniors to get cash from their homes without having to sell them and move, or borrow against them and make monthly loan repayments. They are a great way for homeowners who are house-rich, but cash-poor, to stay in their homes and still meet their financial obligations.

A reverse mortgage is a loan that allows you to convert some of the equity in your home into cash. It is special type of loan for senior homeowners (most require the borrower to be at least 62 years old) that use a home's equity as collateral and you do not have to repay the loan as long as this home remains your principal residence. You repay the loan, plus interest, when you die, sell your home, or permanently (means you have not lived in your home for 12 months in a row) move to another home.

How Much Money Can you Expect to Get with a Reverse Mortgage?

The amount of cash you can get depends on your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates, and where you live. In general, the most cash goes to the oldest borrowers living in the homes of greatest value at a time when interest rates are low. On the other hand, the least cash generally goes to the youngest borrowers living in the homes of lowest value at a time when interest rates are high.

For most reverse mortgages you have choices regarding how the loan is paid to you. You can get an immediate cash advance at closing: a lump sum of cash paid to you on the first day of the loan. You can get a line of credit that lets you take cash advances whenever you choose during the life of the loan, until you use it all up. Or, you can set up a monthly cash advance for a specific number of years that you select, or for as long as you live in your home. Lastly, you can choose any combination of immediate cash advance, line of credit, and monthly cash advance.

Is the Money Taxed? What are my Repayment Obligations?

Reverse mortgage loan advances are not taxable, and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments.

The loan does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 12 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. The estate inherits all remaining equity. The estate is not liable if the home sells for less than the balance of the reverse mortgage.

The Different Types of Reverse Mortgages

There are three basic types of reverse mortgages: federally-insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs); single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations; and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.

The most popular reverse mortgage is the federally insured Home Equity Conversion Mortgage (HECM) and offered by most mortgage companies and banks. This loan is backed by the U. S. Department of Housing and Urban Development (HUD) and can be used for any purpose.

Single purpose reverse mortgages are low cost loans that are offered by some state and local governments. They generally must be used for one specific purpose only for example, to pay for home repairs, improvements, or property taxes. Many of these loan programs are only available to homeowners with low or moderate incomes.
Proprietary reverse mortgages are owned and backed by the private companies that have created them. These loans can be used for any purpose and are generally the most expensive type of reverse mortgage.
HECMs and proprietary reverse mortgages are more expensive than other home loans, with proprietary loans being the most expensive. The start-up costs can be high, so these reverse mortgages can become costly if you stay in your home for just a short time. They are widely available, have no income or medical requirements, and can be used for any purpose.

Federal Truth-in-Lending law requires reverse mortgage lenders to disclose the projected annual average cost of these loans in a way that includes ALL of the costs and benefits, and also takes into account the nonrecourse limits (this prevents either you or your estate from owing more than the value of your home when the loan is repaid).

This Total Annual Loan Cost (TALC) disclosure combines all of a reverse mortgage's costs into a single annual average rate. TALC disclosures can be useful when comparing one type of reverse mortgage to another.

Just remember, reverse mortgage borrowers are still homeowners and because you retain title to your home, you remain responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. So, for example, if you don't pay property taxes or maintain homeowner's insurance, you risk the loan becoming due and payable.

Be Wary of Hard-Sell Reverse Mortgage Scams

Recently there have been a number of financial firms aggressively promoting reverse mortgages with the help of celebrity spokespersons. Their "pitch" suggests that seniors looking for a little extra cash "to do the special things you've always wanted to do, such as travel or hobbies" should utilize a reverse mortgage that they can can help arrange. Unfortunately, these loans typically involve large fees and other onerous requirements. If you are considering a reverse mortgage, the easiest and smartest thing to do is contact a HUD approved counselor or www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm. See this article for more information on avoiding loan modification and foreclosure scams.

Posted by perkerson on 02/03/2010

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