Options for Homeowners Faced with Mortgage Foreclosure

May 2004 The Foreclosure Crisis Committee moves the State to allocate funding to HEMAP for the first time in seven years

Call the Unemployment Information Center at 215-557-0822 for help if you are behind on your mortgage. Our housing counselors may be able to help you.

Housing links:

Options for Homeowners Faced with Mortgage Foreclosure

The following is a brief list of options that might be available to you to help save your home. Contact the Unemployment Information Center at 215-557-0848 for more information and to talk to a housing counselor.

1. HOMEOWNERS EMERGENCY MORTGAGE ASSISTANCE PROGRAM (HEMAP)

HEMAP is a program of the state of Pennsylvania which makes loans to homeowners to prevent foreclosure. To qualify:

You must be less than 24 months behind in your mortgage or you must have money available to you to bring the number of months you are behind down to 24 months or less;
Your default must be for circumstances beyond your control;
You must have a reasonable prospect of being able to start making your mortgage payments again within 24 months of the beginning of your default.
Your loan must not presently be insured by FHA.

The HEMAP program can provide you with a loan that will bring your mortgage current. The program can also lend you money to pay current payments for a total of 24 months. Repayment of the HEMAP loan is based on your income and your ability to pay.

To apply for HEMAP you are supposed to get a notice (Act 91 notice) from your mortgage company telling you of your right to apply for HEMAP. It is supposed to come both certified and first class. It is required to be sent prior to any foreclosure action in the state of Pennsylvania. When you get the Act 91 notice you have 33 days to apply to one of the housing counselors who take HEMAP applications. A list of counselors will be included in your Act 91 notice. All foreclosure actions cease until a decision is made on your eligibility. If you never received the Act 91 notice, but are in foreclosure, you can apply by getting a copy of the notice from your foreclosure complaint or the mortgage company and telling the counseling agency that you never received the Act 91 notice.

The Pennsylvania Housing Finance Agency handles HEMAP approvals and loans.

2. MORTGAGE Foreclosure Diversion Pilot Program

Philadelphia residents can get help through the Foreclosure Diversion program of the Court of Common Pleas. Instituted to reduce foreclosures in 2008, the Diversion program requires mortgage
companies to negotiate a resolution with a defaulting homeowner prior to a Sheriff Sale or the granting of a judgment against the homeowner. The homeowner must contact a non-profit housing counseling agency, like PUP, to begin negotiating an affordable resolution to the problem with the
mortgage company. The homeowner must provide information on their income and monthly expenses which will be sent to the mortgage company for a possible loan modification to allow the

homeowner to avoid foreclosure. If a deal is not reached then the homeowner can go before a Judge Pro Temp who will hold a Conciliation Conference with the mortgage company in another effort to get an affordable work out. The Save Our Homes Hotline (215-334-HOME) will put you in touch with a housing counseling agency to begin the Diversion process.

3. LOSS MITIGATION FOR HUD OR FHA LOANS

This option is available if you have a FHA loan. Mortgage companies are required by HUD to consider you for the following options.

Your mortgage company can enter into a Special Forbearance Agreement with you. Under such an agreement you can pay partial payments or no mortgage payments so long as you are able to keep your mortgage from being 12 full mortgage payments behind. The payment you have to make should be based on your income and your expenses.

When you have enough income to begin making monthly mortgage payments your mortgage company can help you to get a loan from HUD, called a Partial Claim that can pay off up to 12 months of mortgage payments. There is no interest on this loan and you will not have to pay it back until your mortgage is paid off.

Your mortgage company can also, under certain circumstances, modify your mortgage to reduce the interest on your mortgage or to reduce your monthly mortgage payment.

The Unemployment Information Center can help you apply to your mortgage company for the help described above. Your mortgage company has to consider your application for this help and it cannot tell you that it cannot help you because you presently have no income or too little income if you can show that you will be able to get income in the foreseeable future. You can ask your mortgage company to stop the mortgage foreclosure while it considers your application for help. If your mortgage company refuses to be helpful you can complain to the FHA by writing to:

U.S. Department of Housing and Urban Development
Servicing and Loss Mitigation Division
500 W. Main Street, Suite 400
Oklahoma City, OK 73102

The housing counselors may also be able to put you in touch with a lawyer who may be able to help you if your mortgage company refuses to consider your application for help.

If you think you are unable to afford to save your house, your mortgage company may be able to stop the sheriff sale so that you can sell the house at a private sale. This could enable you get some money from the sale, if the value of the house is more than the balance of the mortgage. The mortgage company could also agree, under certain circumstances to accept, your deed for the property and to pay you up to $500.00 for the deed.

4. WORK OUTS WITH A CONVENTIONAL MORTGAGE COMPANY

If you are not eligible for HEMAP and you do not have a FHA Loan you may be able to make an agreement with your mortgage company to modify your mortgage or to allow you to cure your mortgage over time. Our housing counselors can also help you with negotiations with your mortgage company. The mortgage company has the power to stop the sheriff sale while it considers your situation.

5. UNDOING PREDATORY LOANS

Under certain circumstances you may be able to rescind or undo the mortgage on your home. If you think you have a high interest rate loan, that has high fees that you paid when you got the loan, or that has unfair terms that you did not ask for, or if your lender required you to borrow more than you asked for you may have a predatory loan. If you have a predatory loan an attorney may be able to sue the lender to stop the sheriff sale and to change the terms of the loan.

6. FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) AND OTHER GRANT PROGRAMS

If you have most of the money you need to stop the sale of your home, but you do not have all of it, you may be able to get a small grant - usually $1,500.00 or less from one of several agencies around the city. Contact UIC at 215-557-0848 for a list of agencies. The grants are usually only available if they will, along with whatever other money you have available to you, resolve your problem.

7. BANKRUPTCY

In some cases a Chapter 13 bankruptcy can be used to help you save your home. A chapter 13 bankruptcy can be especially helpful where the default was the result of a temporary loss in income or where the mortgage is a predatory loan that can be reduced through litigation to a an amount that is affordable. In some rare cases a Chapter 7 bankruptcy can be helpful if your inability to make the mortgage payments is the result of large unsecured debts that you have been trying to pay. A bankruptcy is not a magic solution and will often fail unless you are represented by a competent attorney and unless you have the discipline and income to follow the financial plan. Sometimes a bankruptcy can make matters worse. Homeowners should be very careful when they select an attorney. Not all attorneys who hold themselves out as experts in bankruptcy have the ability, knowledge or willingness to take advantage of the provisions of the law that are available to help people save their homes.

8. GOVERNMENT REFINANCING PROGRAMS

The state and federal governments have created programs to help homeowners refinance their mortgages. HUD has created the HOPE for Homeowners (H4H) program to help homeowners refinance out of unaffordable mortgages. The PA Housing Finance Agency has created the Refinance to an Affordable Loan Program (REAL) program for refinancing your mortgage and also the Homeowners Emergency Recovery Opportunity Loan Program (HERO) for homeowners with even worse credit. In the HERO program the agency pays off your mortgage and offers you an affordable repayment arrangement. All of these programs have been slow to make loans to homeowners so far.