Tool: Foreclosure Resources

Foreclosure resources help homeowners in jeopardy of losing their homes avoid or navigate the foreclosure process. Programs include a variety of tools such as homebuyer education, debt and financial counseling and facilitating mortgage refinance.

Background

At the peak of the recent real estate boom, many homebuyers entered into mortgage agreements with adjustable rates that would reset within a few years with higher monthly payments. Buyers assumed their homes would increase in value within a few years and that they would be able to refinance into more traditional, fixed-rate mortgages. This practice made homeownership available to many moderate-income households, who were otherwise unable to purchase homes through traditional mortgage lending.

As the economy declined in the late 2000s and unemployment rose, many homeowners became unable to afford their mortgage payments. As home values declined sharply and interest rates increased, some homeowners found themselves “upside-down” on their mortgages–owing much more than their home’s worth and having few options to refinance. Lenders, unwilling to re-negotiate mortgages with homeowners in default, moved to repossess property through foreclosure. This situation has had an acute effect on moderate-income homebuyers, who were more often victims of unsound lending practices and adjustable rate mortgages, and thus more exposed to the faltering economy and housing crisis.

Resources

Local governments can provide numerous resources to at-risk households, including information on:

The foreclosure process.
Licensed financial and housing counselors.
Working with loan servicers.
Budgeting and finances.
Options for settling foreclosure proceedings.
State and federal foreclosure prevention and assistance programs.

To stem the consequences of foreclosed and vacant properties, and to keep homeowners in their homes, federal and state agencies have initiated counseling and foreclosure prevention programs. Financial assistance programs may also be available to provide loans to avoid foreclosure. State programs exist to help homeowners avoid foreclosure scams and provide legal aid to victims of fraud.