A HUD glossary - Military Financial Advice - Army Times

A HUD glossary

Mortgage modification: If you can make payments on your loan but don’t have enough money to bring your account current or can’t afford your current payment, your lender may be able to change the terms of your original loan to make the payments more affordable. Options include:

• Adding the missed payments to the existing loan balance.

• Changing the interest rate.

• Extending the number of years you have to repay.

Partial claim: If your mortgage is insured, your lender might help you get a one-time, interest-free loan from your mortgage guarantor to bring your account current. You may be allowed to wait several years before repaying this loan.

When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must sign a promissory note, and a lien will be placed on your property until the promissory note is paid in full. The promissory note is interest-free and is due when you pay off the first mortgage or when you sell the property.

When keeping your home is not an option, consider these possibilities:

Sale: If you can no longer afford your home, your lender usually will give you a specific amount of time to find a buyer and pay off the total amount owed. You will be expected to use the services of a real estate professional who can market the property aggressively.

Pre-foreclosure sale, short payoff or short sale: If you can’t sell the property for the full amount of the loan, your lender may accept less than the amount owed. Financial help may also be available to pay other lien holders and/or help toward moving costs. You may qualify if:

• The loan is at least 2 months delinquent.

• You (or your real estate professional) can sell the house within three to five months.

• A new appraisal (obtained by your lender) shows that the value of your home meets HUD program guidelines.

Assumption: A qualified buyer may be allowed to take over your mortgage, even if your original loan documents state that it is nonassumable.

Deed in-lieu-of foreclosure: As a last resort, you “give back” your property and the debt is forgiven. This will not save your house, but it is less damaging to your credit rating than foreclosure.

This option has its limitations. You usually have to try to sell the home for its fair market value for at least 90 days before the lender will consider this option. This option may not be available if you have other liens, such as creditor judgments, second mortgages and IRS or state tax liens.

Foreclosure: A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure rules vary according to state laws.

—Karen Jowers