Troubleshooting Mortgage Problems: Strategies For Financial Freedom

There are many issues that can arise with mortgages, from problems with the property itself to issues with the lender. If you're having trouble paying your mortgage, it's important to get help and be in touch with your lender as soon as possible. You can also reach out to a HUD-approved housing counselling agency or call the HOPE Hotline. If you believe you've experienced housing discrimination, you can submit a complaint with the Department of Housing and Urban Development (HUD). If you're experiencing issues with your mortgage company's services, you can try contacting the company first and, if that doesn't work, file a complaint with the Consumer Financial Protection Bureau (CFPB).

How do I fix a problem with my mortgage?

What to do if you're unable to make mortgage payments

If you're unable to make your mortgage payments, it's important to act quickly to avoid serious consequences, which could include losing your home. Here are some steps you can take:

Contact your lender or mortgage servicer

Get in touch with your lender or mortgage servicer as soon as possible to discuss your situation and explore alternatives. They may be able to offer you a forbearance, which would reduce or suspend your payments for a certain period, giving you time to get back on track financially. Be prepared to explain your circumstances and why you're unable to make the payments.

Seek expert assistance

Contact a HUD-approved housing counselling agency to get free, expert assistance on avoiding foreclosure. They can help you understand your options and make a plan to address your financial challenges. You can also call the HOPE™ Hotline at (888) 995-HOPE (4673) for 24/7 support.

Review your finances and budget

Take a close look at your financial situation and budget to understand why you're unable to make the mortgage payments. Consider consulting a financial professional or credit counsellor to help you manage your money, cut expenses, and ensure you have a plan to pay your bills on time.

Explore mortgage modification

If you're experiencing long-term financial difficulties, you can ask your lender about a mortgage modification. This involves permanently adjusting the terms of your loan to make your monthly payments more manageable, such as by extending the loan term or reducing the interest rate. Keep in mind that lenders are under no obligation to grant modifications and typically do so for customers with strong credit.

Understand the risks of missed payments

Missing mortgage payments can have serious consequences, including late fees, damage to your credit score, and the possibility of foreclosure. If you're renting out the property, you'll need to arrange to repay any missed payments, and your tenants could have grounds to sue you if you go into foreclosure.

How to understand the terms of your mortgage loan

Understanding the terms of your mortgage loan is crucial before making an offer on a home. Here are some key concepts to help you get started:

Adjustable-Rate Mortgage (ARM)

With an adjustable-rate mortgage, the interest rate varies over the life of the loan, depending on market movements. Typically, there is an initial period of fixed interest, usually lasting 5-10 years, during which you will likely pay a lower interest rate than with a fixed-rate loan. After this period, the interest rate may increase or decrease regularly based on market changes. Some lenders may set a lifetime adjustment cap, limiting how much the interest rate can increase over the loan's life.

Fixed-Rate Mortgage

In contrast, a fixed-rate mortgage offers a stable interest rate that remains unchanged throughout the loan term. This option provides more certainty about long-term loan costs, although your total monthly payment can still fluctuate due to changes in property taxes, insurance, or mortgage insurance.

Down Payment

The down payment refers to the initial payment made when you purchase a home. It represents a portion of the total cost, with the remaining balance being financed through your mortgage loan.

Escrow

An escrow account is established by your mortgage lender to cover specific property-related expenses, such as property taxes and homeowner's insurance.

Closing Costs

Closing costs are the fees and expenses associated with finalizing your mortgage loan. These costs can include items such as origination fees, processing fees, and other administrative charges.

Underwriting

Underwriting is a phase in the mortgage process where your lender conducts a thorough assessment of your financial information, including income, assets, debts, and property details. This evaluation helps the lender determine the level of risk associated with granting you a mortgage.

Remember, this is just a starting point. Consult with professionals, such as real estate agents, attorneys, and mortgage lenders, to gain a comprehensive understanding of the terms of your mortgage loan and make informed decisions.

What to do if you've been denied a loan modification

If your loan modification application has been denied, there are still several options available to you. Firstly, it is important to understand the reason for the rejection. Common reasons for denial include incomplete applications, insufficient income, a high debt-to-income ratio, previous modifications, investor guidelines, the type of loan, or even mistakes made by the mortgage servicer. Review your denial letter and identify the reason for the rejection.

If you believe the decision was made in error or if your financial situation has improved since your initial application, you can consider reapplying for the modification. Gather the necessary documentation, such as current pay stubs, bank statements, and tax returns, to demonstrate any positive changes in your financial circumstances. You may also want to consult a loan modification specialist or attorney to ensure your application is as strong as possible and to negotiate with your lender on your behalf.

If you wish to appeal the decision, you must act promptly as there is usually a time frame for submitting an appeal. The appeal process typically involves writing a formal letter and providing additional documentation to support your case. Remember that you can also explore other loss mitigation options, such as forbearance, repayment plans, short sales, or deeds in lieu of foreclosure. Each of these options has its own advantages and disadvantages, so be sure to carefully consider your choices and seek professional advice if needed.

In some cases, you may be offered alternative loan modification programs or other foreclosure prevention alternatives. Your lender is required to provide you with information on any available alternatives and the steps you need to take to be considered for those options. Don't hesitate to reach out to HUD-approved housing counselors or legal professionals for guidance and to explore all available options to fight against foreclosure and save your home.

How to identify and avoid mortgage scams

Mortgage scams can take many forms and target different types of consumers. They can also be carried out by various parties, including lenders, brokers, borrowers, and other entities. Since the money lost from mortgage scams can often be high-value and challenging to recoup, it is essential to be vigilant and informed. Here are some ways to identify and avoid common mortgage scams:

Research and Compare: Do your due diligence by researching real estate agents, lenders, and loan options. Compare lenders, check their ratings, and review loan documents carefully. Be cautious of any offers or terms that seem too good to be true, as these could be predatory loan tactics.

Be Wary of Misrepresentation: Any misrepresentation of information on a home loan application can be considered mortgage fraud. This includes false or altered income documentation, using a proxy buyer to hide the actual borrower's identity, or credit/income misrepresentation.

Secure Your Information: Scammers may attempt to steal your banking information through phishing schemes. They may hack legitimate email addresses or send fraudulent emails posing as someone involved in the transaction. Be vigilant, and if you notice any suspicious activity, report it immediately.

Beware of Foreclosure Scams: If you are facing foreclosure, be aware of potential scams that prey on homeowners in financial distress. These may include equity stripping, where an investor offers to purchase your property to avoid foreclosure but then leases it back to you while pocketing the rental income. Loan modification scams are also common, where scammers pose as government officials or attorneys and offer to negotiate your mortgage terms to avoid foreclosure.

Report Suspicious Activity: If you encounter suspicious behaviour or believe you have been the victim of a scam, report it to the authorities. You can file a complaint with the Consumer Financial Protection Bureau (CFPB) or your state consumer protection office. Additionally, the Federal Trade Commission (FTC) handles reports of deceptive statements or actions by mortgage companies.

Remember, the best defence against mortgage scams is being informed, vigilant, and proactive in researching and protecting your financial interests.

What to do if you've been a victim of housing discrimination

If you believe you have been a victim of housing discrimination, you have the right to file a housing discrimination complaint. The Fair Housing Act is a federal law that protects you from housing discrimination. It prohibits discrimination in renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities.

The U.S. Department of Housing and Urban Development (HUD) is the federal agency charged with enforcing the Fair Housing Act. You can report housing discrimination to HUD by calling them at 800-669-9777 (TTY: 800-927-9275), visiting the HUD website, or mailing a printed form to your regional FHEO office. HUD provides interpreters for persons with limited English proficiency, and the online report form is available in multiple languages. It is important to report housing discrimination as soon as possible, as there are time limits on when an allegation can be filed. When reporting, provide as much information as possible.

In cases where state or local law provides rights and protections that are similar to the Fair Housing Act, HUD may refer your complaint to the appropriate state or local enforcement agency for investigation. While the investigation is ongoing, HUD (or the state or local agency) will also work to help you reach a conciliation agreement with the other party. If conciliation is unsuccessful and HUD determines that there is reasonable cause to believe that discrimination occurred, they will issue a Charge of Discrimination. At this point, you or the respondent may choose to have the case heard in federal or state court.

In addition to filing a complaint with HUD, you also have the right to bring a civil lawsuit in Federal District Court within two years of the discriminatory housing practice occurring or terminating. If you cannot afford an attorney, you may seek assistance from a legal aid organization or ask the court to appoint one for you.

Frequently asked questions