The National Economics Department Financial Freedom Campaign NAACP Foreclosure Prevention & Recovery
Foreclosure, what’s that??? A Foreclosure occurs when the loan becomes delinquent because payments have not been made or when the borrower is in default for a reason other than failure to make timely mortgage payments. The legal process by which a property may be sold and the proceeds of the sale applied to the mortgage debt. So this basically means that once a house is in foreclosure, it LITERALLY means it no longer belongs to you (the homeowner)
First month missed payment- lender will contact you by letter or phone. • Second month missed payment- lender will call to discuss why you have not made your payment. IT IS IMPORTANT TO ANSWER THEIR PHONE CALLS • Third month missed payment- you will receive a letter (called a demand letter or Notice to Accelerate) from your lender stating the amount delinquent. You will have 30 days to bring your mortgage current. • Fourth month missed payment- If you have not paid the full amount or worked out arrangement you will be referred to lender’s attorney’s. YOU WILL INCUR ALL ATTORNEY’S FEE’S AS PART OF YOUR DELINQUENCY. • Sheriff’s or Public Trustee’s Sale- This is the ACTUAL day of foreclosure. • Redemption Period-Redemption is a period after your home has already been sold at a foreclosure sale when you can still reclaim your home. You will need to pay the outstanding mortgage balance and all costs incurred during the foreclosure process. Foreclosure Process (General)
Foreclosure Process (Cont.) • It generally begins 3-6 months after the first missed mortgage payment. • There are three types of foreclosures: • Judicial • Power of Sale • Strict Foreclosure • All types of foreclosure require public notices to be issued and all parties to be notified of proceedings. • The foreclosure process is different for every state. • Differences amongst states range from the foreclosure notices, redemption periods, and the scheduling and notices issued regarding the auctioning of the property.
- Judicial Foreclosure Available: Yes - Non-Judicial Foreclosure Available: Yes - Primary Security Instruments: Deed of Trust, Mortgage - Timeline: Typically 60 days - Right of Redemption: Yes - Deficiency Judgments Allowed: Varies • In North Carolina, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process. For More Information, please visit http://www.foreclosurelaw.org/North_Carolina_Foreclosure_Law.htm North Carolina Legal Foreclosure Proceedings
To date, 4.5% of white borrowers lost their homes to foreclosure, black and Latino borrowers had 7.9% and 7.7% foreclosure rates, respectively . • 17% of Latino homeowners and 11% of African-American homeowners have already lost their home to foreclosure or are now at imminent risk • High-income black borrowers, were 80% more likely to lose their homes to foreclosure than their white counterparts, while Latino borrowers were 90% more likely. A CLOSER look at the numbers…
Between 2009 – 2012, the foreclosure crisis is estimated to drain $194 billion in African American household wealth and $177 billion in Latino household wealth (Center for Responsible Lending, 2010). • African Americans homeownership rate has decreased to 45% and 47% for Latinos (Center for American Progress, 2011). • African Americans current homeownership rate is comparable to white’s homeownership rate in the 1940’s. • The wealth gap between whites and African-American families increased more than four times (IASP, 2010). Foreclosure STRIPS wealth from Minority Communities
Effects of Foreclosure Homeowner Community • Increased physical and mental health treats • Negative impact on credit rating • Loss of peace of mind • Potential homelessness • Decreased sense of security for family • Negative financial impact on community-at –large • Decrease values of nearby housing/properties • Communities blighted by neglect • Increased need for local government social programs & public services
Predatory Lending Practices • Chronic Unemployment • Health Issues • Unforeseen change in circumstance What Happened?
Comes in a number of forms (ex. Reverse Mortgages, etc.) • In each instant however, a financial institution takes unfair advantage of a consumer’s financial needs by charging high interest rates and other unconscionable fees and charges. • For more info visit www.naca.net Predatory Lending…. wHaT???
Forbearance • Modification • Short Sale • Deed-for-Lease • Deed-in-Lieu of Foreclosure • Partial Claim • Postpone Payments • Pre-Foreclosure Sale • Contact HUD • Refinance • Repayment Plan Other Options
Refinance- A new loan with new term, interest rates and monthly payments- completely replaces your current mortgage • Repayment Plan- An agreement between you and your mortgage company that lets you pay the past due amount on your mortgage payments over a specified time period in order to bring your mortgage up to date. • Forbearance- An offer by your mortgage company to temporarily suspend or reduce your monthly mortgage payments for a specified period of time. • Modification- an agreement between you and your mortgage company to change the original terms of your mortgage-such as payment amount, length of loan, etc. • Short Sale- the sale of a home for less than the balance remaining on your mortgage. • Deed-for-Lease- A new program that allows you to temporarily lease your home. You first transfer the ownership of your home to the mortgage company (called a Deed-in-Lieu), in exchange for release from your mortgage loan payment. You can rent the property back at an affordable rate-and remain as a tenant. Definitions
Deed- in-Lieu Foreclosure (DIL)- the ownership is transferred from homeowner to the mortgage company in exchange for a release from your mortgage loan and payments. • Partial Claim- Your lender may be able to work with you to obtain an interest –free loan from HUD to bring your mortgage current, if you qualify. • Contact HUD- Contact the Department of Housing & Urban Development (HUD) to learn more about the federal programs that may help • Postpone payments- Senior citizens and disabled persons facing foreclosure may be eligible to postpone property tax payments or special assessments. Contact your local County Assessor’s office for more information. • Pre Foreclosure Sale- You may be able to sell off your property and pay off your mortgage loan to avoid foreclosure and damage to your credit. (see short sale deification) Definitions Cont.
1) Contact Your Loan Servicer Immediately 2) If Feasible, refinance your loan 3) Call the 24 hour Free Counseling Hotline 1-888-995-HOPE or any other HUD certified counselor 4) Get in touch with city, state, and/or county government agencies 5) Make creditors aware of your situation 6) Create a Budget 7) Find Creative Ways to Save 7) Re-Read your Mortgage Agreement 9) Seek Legal Counsel 10) Make and Appointment to see your Pastor, Spiritual leader, etc. ( if applicable) Foreclosure Prevention Tips
BEWARE OF SCAMS! • HELP IS FREE!!! • BEWARE OF ANY ONE WHO SAYS THEY CAN “SAVE YOUR HOME IF YOU SIGN OR TRANSFER OVER THE DEED TO YOUR HOUSE • DON’T SIGN PAPERS IN EXCHANGE FOR A PROMISE THAT SOMEONE ELSE WILL PAY OFF YOUR MORTGAGE • NEVER SUBMIT YOUR MORTGAGE TO ANYONE OTHER THAN YOUR MORTGAGE COMPANY WITHOUT YOUR MORTGAGE COMPANY’S APPROVAL Foreclosure Assistance Tips
Establish a Budget: And stick to it! Be realistic on what you can afford; try to set at least a small amount aside each month for an emergency fund. An emergency fund should have enough in it to cover at least 6 months of monthly bills and living expenses. Proper planning is critical for survival and rebuilding your life after foreclosure. • Get a copy of your credit report: You can visit annualcreditreport.com to receive a free copy of your credit report from 3 major bureaus. It is not uncommon for credit reports to differ between bureaus or to contain errors. Look them over and be sure errors are corrected. • Restore your Credit: A credit restoration (or credit repair) kit can be purchased at most office supply stores. They contain step by step instructions and sample letters to credit bureaus and creditors. This is a long process and should be started immediately. • Rebuild your Credit: If you still have active credit cards, use them and pay them off each month. Otherwise, establish a credit card account; you may have to get a secured account, but that's a start. Use it and pay it off, on time, every month. After about 6 months, apply for store credit or a car loan. Keep balances very low, make timely payments. • Educate yourself on Alternate Financing: It will take some time before you will be able to get a traditional mortgage or other financing. Learn all you can by researching financing alternatives for credit challenged people. The next home you purchase could be with a land contract or lease option. Find out how each works, tax advantages and payment terms to see if it fits your current financial situation. Foreclosure Recovery Tips
KnowYourOptions.com – is an online resource, created by Fannie Mae to help homeowners learn about their options to avoid foreclosure and how to get the help they need • TheHomeLoanLearningCenter.com – provides step-by-step information on how to become financially literate • Homeownership Preservation Foundation – is an independent nonprofit that provides HUD-approved counselors dedicated to helping homeowners • HOPE NOW – is an alliance between HUD approved mortgage market participants that provides free foreclosure prevention assistance • National Foundation for Credit Counseling – provides high- quality financial education and counseling services • NeighborWorks America – offers resources fore foreclosure prevention professionals • HUD: Guide to avoiding Foreclosure- offers information that can help when facing foreclosure • National Consumer Law Center- provides steps that advocates can take to help prevent foreclosure WHERE TO FIND HELP