Gather Records and Identify Deadlines
Open mail as soon as it arrives
Open your mail and read it as soon as it arrives. If you ignore letters or court papers, you may lose your home without even having a chance to defend yourself. Be especially careful to look at papers that are hand-delivered or that require a signature from you. These papers usually have short deadlines and require you to do something quickly. Papers that come from your lender, your lender’s attorney, or the court are especially important.
Identify any deadlines
Check for deadlines on any written papers such as letters from the lender or the lender’s attorney or on any court papers. Mark these down on a calendar. Remember that a homeowner who acts within the deadlines is in a better position than one who is late to respond. Use the information in Foreclosure Timeline (The Foreclosure Process) to determine where you are in the foreclosure process and what you need to do as your next step.
Beware of scams (offers that sound too good to be true)
When you are in foreclosure, you may receive a lot of junk mail. This happens because court records are public and companies use lists of foreclosure filings to mail information about their services to people in foreclosure. Some companies may even visit your home to sell you their services. Beware of the offers from these companies. An offer to help you save your home from foreclosure that sounds too good to be true probably is too good to be true. Below are two common scams:
Get a copy of your mortgage documents
At a mortgage closing, a homeowner signs many documents in order to get a mortgage loan. The mortgage closing may take place in an office or it may even take place in your house or a public place. The documents you signed at the closing are very important. You must try to understand the mortgage documents in order to prepare a defense to foreclosure. You should have been given a copy of the documents at the closing. If not, or if you can’t find those documents, you can get a copy by writing a letter to your mortgage servicer.
Send a Request for Information
If you can’t find your mortgage documents, you are entitled to receive a copy of them from the mortgage servicer (the company collecting the payments from you) by writing a letter called a Request for Information (RFI). See Foreclosure Forms for a sample RFI and instructions.
Other documents related to the mortgage
It is helpful to also have the following documents handy, especially if you disagree with the amount of money the lender claims that you owe.
Evaluate Your Finances
Find out how much your house is worth
You can find out how much your property is worth by contacting a realtor and asking him or her to prepare a comparative market analysis. Many realtors will do this at no charge. This will help you determine if you have any equity in your property. (Equity is the amount of money that would be left over if you subtract the amount of any liens—mortgages or loans—from the market value of your property.) Determining the market value of your home will help you make decisions about what to do, such as whether it is time to sell the property or whether a bankruptcy can help you save your home. For more information about bankruptcy see Other Ways to Protect Your Home From Foreclosure.
Prepare a budget
To understand how much you can afford to pay for housing, prepare a budget showing your actual income and expenses for the past few months. A general rule of thumb is that your housing expenses (which include principal, interest, taxes, and insurance) should not be more than 38% of your gross (before tax) income. Your housing payment can be higher, but you need to have enough income to meet all of your other expenses, such as utilities, food, and transportation. This information is important so that you can make realistic decisions about what to do next.
A housing counselor is someone who can help you prepare a budget.
Be aware that lenders may use formulas different from this one to determine an affordable housing payment, and that lenders will also be interested in your other debts when they evaluate how much you can afford to pay.
Save your money
If your lender will not accept your mortgage payments, it is very important that you save all of the money that you would have spent on your monthly housing payment each month. If you cannot save this amount, put aside as much as you can afford. If possible, try to save at least 38% of your gross monthly income each month or enough to cover the taxes and homeowner’s insurance, whichever is more. You may need this money to settle the foreclosure lawsuit with the lender or, in the worst case, use it to relocate (move into other housing).
Write Out Your Story
Writing out the story of what happened to you will help you, a housing counselor, an attorney and, eventually, a judge to understand your defenses. Many defenses to foreclosure involve looking back at the events that happened at the time the loan (or a series of loans) was made. In your story, try to explain how you got from a place where you could afford your property to a place where you cannot. Try to answer all of these questions:
Review and Understand Your Mortgage
At the mortgage closing, you signed many documents. Look for these documents that will help you understand your mortgage and prepare a defense:
What is a mortgage?
A mortgage is an agreement that a lender may use a house as collateral for a debt. Using the property as collateral means that, if the homeowner does not pay the debt, the lender can bring a foreclosure case in court so that the property can be sold to satisfy the debt.
After a homeowner signs a mortgage, the original mortgage is recorded with the County Clerk in the county where the house is located. You should be given a copy of the mortgage at the time you sign it. After the mortgage is recorded, you should receive a second copy in the mail, stamped with the recording information.
What is a note?
When you sign your mortgage, you also sign a document called a note. The mortgage note is like an IOU. The note spells out the amount of money you borrowed and the terms for repayment, such as the interest rate and length of the loan. A loan default occurs when a borrower fails to do what the mortgage note requires. For example, a homeowner who misses a mortgage payment is in default.
It is important to identify and understand at least the following information from your mortgage note:
What is principal? The principal is the total loan amount borrowed. In other words, it is the face value of the note.
What is the interest rate? The interest rate is the amount that a borrower pays the lender for the use of the money, expressed as a percentage. There are two types of interest rates:
What is the loan term? The loan term is the length of the loan. Most loans last for 30 years. A loan that lasts for 15 years will have higher monthly payments, but you will pay less interest over the life of the loan. A loan that lasts 40 years will have lower monthly payments but because you are paying for a longer time, you will pay a lot more interest over the life of the loan.
What are exotic loan products? Some loans have more complicated features. These loans are sometimes called exotic loan products. If you received an exotic loan product, ask yourself whether it was unfair, not a good match for your needs, overly harsh, inevitably designed to lead to foreclosure, or not what you bargained for. If so, you may have been a victim of predatory lending. In your Answer to the Foreclosure Complaint, you should include specific information about the terms of the loan and why they are inappropriate for you. Below are some examples of unfair, harsh loans that are probably not what you bargained for:
This information last reviewed: Jan 10, 2018