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, your lender or HUD could  seek a deficiency judgment. If that happens, you not            only lose your home, you also would  owe your lender or HUD an additional debt.

     Foreclosure of a deficiency judgment could seriously affect your ability to qualify for
     credit in  the future. So you should avoid it if all possible!

     Q: What should I do?

           1.  Do not ignore the letters from your lender. If you are having problems making
                your payment, contact your lender immediately. 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.
           2. Stay in your home for now. You may not qualify for assistance if you abandon
                your property.
           3. Contact a HUD-approved housing counseling agency. They have information
               on services and programs that could help you. The housing counseling agency
               may also offer credit counseling. These services are usually free of charge.
           4. If you bought your home with a Veterans Administration (VA) guaranteed loan,
               call the VA office nearest you.

     Q: What are my alternatives?

          Your options include the following:

          Special forbearance. Your lender may be able to arrange a repayment plan
          based on your financial situation. Your lender may even provide for a temporary           reduction or suspension of your payments. You may qualify for this if you have
          recently lost your job or your source of income or if you had an unexpected
          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 including           proof of your hardship.

          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 but your net income is less than it was before the default (failure
          to pay).

          Partial claim. Your lender may be able to work with you to obtain an interest-free
          loan from HUD to bring your mortgage current.

          You may qualify if:

              1.  your loan is at least 4 months delinquent but no more than 12 months delinquent.
              2.  your mortgage is not in foreclosure; and
              3.  your are able to begin making full mortgage payments

              When your lender files a Partial claim, HUD will pay your lender the amount
              necessary to bring your mortgage current. You must execute a promissory not,
              and a Lien will be placed on your property until the promissory note is paid in full.               The promissory note is usually interest-free and will be due if you sell or leave
              your property, or when your mortgage matures.

         Pre-foreclosure sale. This will allow you to sell your property and pay off your          mortgage loan to avoid foreclosure and damage to your credit rating.

         You may qualify if:

             1.  the "as is" appraised value is at least 70% of the amount you owe and the
                  sales price is 95% of the appraised value;
             2.  the loan is at least 2 months delinquent prior to the pre-foreclosure sale date; and
             3.  you are able to sell your house within 3 to 5 months (depending on what lender                   agrees to).

         An additional benefit to this option is the assistance you will receive with the
         Seller-paid closing costs.

         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 will help
         your chances of getting another mortgage loan in the future.

         You can qualify if:

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

     Q: How do I know if I qualify for any of these alternatives?

          A housing counseling agency can help you determine which, if any, of these options           may meet your needs. You should also discuss the situation 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 that 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 scam artists:

               1. Don't sign any papers you don't fully understand.
               2. Make sure you get all "promises" in writing.
               3. Beware of any loan assumption where you are not formally released from
                   liability for your mortgage debt and contracts of sale.
               4. Check with a lawyer or your mortgage company before entering into any deal                    involving your home.
               5. 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.
               6. Never pay any money up front.

      Q: What are the main points I should remember?

               1. Don't lose your home and damage your credit history if you can help it.
               2. Call or write your mortgage lender immediately.
               3. Stay in your home to make sure you qualify for assistance.
               4. Arrange an appointment with a HUD-approved housing counselor to explore
                    your options.
               5. Cooperate with the counselor or lender trying to help you.
               6. Explore every alternative to losing your home.
               7. Beware of scams.
               8. 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.
               9. Act now. Delaying can't help. If you do nothing, you will lose your home and your
                   good credit rating.

 The above information was provided by the U.S. Department of Housing
and Urban Development. 451 7th Street S.W., Washington, DC 20410.
Telephone: (202) 708-1112.  TTY: (202) 708-1455.