Homeowners who experience financial hiccups can find themselves in a bind. Once the emergency’s over — you have a new job, your deadbeat cousin paid you back, business picked up — you’d like to go back to being a good financial citizen and pay your bills. Unfortunately it’s not just a matter of resuming your mortgage payments — you now have a backlog of unpaid principal, interest, fees, and maybe even attorneys’ charges and there is no way you can make good on it.
If you communicate with your lender and can show that you are able to pay your mortgage, you may be offered a chance to keep your home — in mortgage lending this is called a retention option. One kind of retention option is called a claim advance. Homeowners who have an FHA loan (which required that you pay for special insurance when you got the mortgage) or any other loan that requires them to pay mortgage insurance premiums may be able to use that insurance to get themselves out of a jam.
The deal is this: If your mortgage was to go into foreclosure, your lender would probably file a claim and the mortgage insurer would have to pay it. So it may be in everyone’s best interest if that doesn’t happen. If you qualify, the insurer may lend you the money to bring your mortgage current, interest-free, and at terms you can repay. So if there is any doubt about your ability to make your next mortgage payment, call your lender’s workout or resolution department right away — make it easy for them to make it easy on you.
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Can you still get a claim advance if you are getting ready to do a pre- foreclosure sale?
Hi Julie,
best bet is to ask your lender. Whether they and the insurance company are willing to do this depends on you being able to show that you are capable of making your mortgage payment successfully if given a little help with the arrrearages. If it looks like helping you out will just delay an inevitable foreclosure they would rather do it sooner than later in order to keep the costs down. But if you can make the payments, your best bet for getting some help is if you can show:
That whatever kept you from getting behinds has been fixed (for example, getting a job if you were unemployed, resolving an illness, dumping an expensive spouse, or setting up a payment plan (or even filing bankruptcy in some cases).
It’s even better if you can show that whatever caused you to be late was due to circumstances beyond your control (such as your employer going out of business) or that you have taken steps to fix a mistake you made (selling a car or boat with a too-high payment, for example, or getting medical insurance so an illness won’t break your bank next time).
Prove that that you are committed to making your house payment (some have gotten into trouble by paying their credit cards while stiffing their lenders, which naturally doesn’t sit too well with a mortgage company). Make sure they know your mortgage comes first.
The best advice I can give you is to get your information together, make sure that you are capable of making your payments with a little help from your bank, and ASK. Nicely. Good luck!