How to Repair Credit After Foreclosure

  • Is the possibility of foreclosure on your home is lurking in the back of your mind?
  • Learn how to save your home and avoid foreclosure scams. 
  • Contact your mortgage company as soon as possible if you get a foreclosure notice or are having trouble paying your mortgage. 
  • It is critical to keep the lines of communication open between you and your lender.
Help is available by calling 1-888-995-HOPE for personalized advice 24/7, at no cost to you, from housing counseling agencies certified by the U.S. Dept. of Housing an Urban Development (HUD). Homeowner's HOPE is a counseling service provided by the non-profit Homeownership Preservation Foundation. The HOPE hotline counselors have a solitary mission to help homeowners avoid foreclosure, and are trained  to set up a personal plan of action for your situation. 

Before contacting them it may be wise to have the following documentation available:
  • Most recent Tax Return
  • Two most recent Bank Statements
  • Two most recent pay stubs (if you receive them) or documentation of your income if you have received your income from maintenance or child support
  • Monthly mortgage statement with the mortgage servicer information and your loan account number
  • If applicable, information on any other mortgages on your home.
  • Account balances and minimum monthly payments on all your credit cards 
  • Account balances and monthly payments on any other debts (car loans, student loans)
  • Estimates of monthly expenses such as utility bills, food, insurance payments, medical bills, etc
Additional Resources

Be Alert to Scams:  
  • There is no such thing as a "foreclosure rescue company"
  • don't do business with anyone who offers you an easy out of foreclosure
  • Scammers target people having trouble paying their mortgage.
  • Some claim to "rescue" you from foreclosure, others promise to modify your loan for a fee 
  • For more information visit // The Federal Trade Commission (FTC), our nations consumer protection agency, wants you to know how to avoid scams which could make your situation even worse.

Review types of loans available to consumers shopping for mortgage loans:
  • ARM (Adjustable Rate Mortgage): An ARM is a mortgage that does not have a fixed interest rate.  The rate changes during the life of the loan based on changes in an index rate, such as the rate for Treasury securities or the Cost of Funds Index.  Although the ARM usually offers a lower initial interest rate than fixed-rate loans, the interest rate will fluctuate over the life of the loan depending on market conditions. On the up-side the loan agreement generally specifies a minimum and maximum rate. For more information on ARMs see the Consumer Handbook on Adjustable Rate Mortgages
  • APR (Annual percentage rate): A yearly rate expresses the cost of credit. For car loans and mortgages (close-ended credit), the APR includes credit charges that the borrower is required to pay, such as: internet rate, broker fees, points, etc.. Important to note: An APR is not used in leasing agreements.
  • Conventional Loans: Conventional mortgage loans are loans other than those loans guaranteed by a government agency like the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly FmHA- Farmers Home Administration) 
  • Fixed-Rate Loans: Fixed rate loans generally have a repayment of 15, 20,or 30 years. Both the interest rate and monthly payments remain the same for the life of the loan. 
Are you behind on your payments? 
  • If you are having trouble making your payments, call your loan servicer and discuss any options available.  
  • Do not postpone calling because the longer you wait to make that call the fewer options you may have. 
  • Many loan services are making more options available to borrowers
  • Call them even if they have denied a request in the past.

How to Avoid Default and Foreclosure: 
The Obama Administration has implemented programs to assist home owners who are at risk of foreclosure and/or struggling to make their monthly mortgage payment.  
Most of these programs are administered through the US Treasury Department and HUD.  
Click here to determine which program can best assist you Save Your Home: Tips to Avoid Foreclosure.

What is the Making Home Affordable (MHA) Program? 
Within the Obama Administration is a broad strategy helping homeowners to avoid foreclosure, in turn stabilizing the housing market with the ultimate goal of improving the country's economy. Homeowners can lower their monthly mortgage payment and get into stable loans at low rates. 

What information do I need before contacting my Loan Servicer?
  • Your loan account number
  • Brief explanation of your situation
  • recent income documents (pay stubs, Social Security Benefits statements, unemployment benefits, disability received, retirement income, or public assistance
  • List of your monthly household expenses
Consider giving up your home without foreclosure? 
Not all foreclosures can be resolved; if you can't keep your home, or maybe you don't want to keep your home consider the following:
  • Selling your home: foreclosure proceedings may be postponed if you put your home on the market or have a pending contract. This will work providing the proceeds from the sale of the house will pay of the balance of the mortgage, and any fees associated  with the sale of your home. If you sell your home you most likely will avoid late fees, attorney fees, and damage to your credit in regards to foreclosure, it will also protect any equity you may have in your home.
  • Short Sale: Your loan serviser may allow you to sell your home before it forecloses agreeing to forgive any shortfall between the sale of the home and the mortgage loan balance.
  • Deed in Lieu of Foreclosure: As long as you do not have other loans or obligations secured to your home a Deed in Lieu of Foreclosure may be an option. In agreement of your loan servicer you voluntarily hand over the title to your home, to your servicer, in exchange for canceling the mortgage debt owed. Although you will lose any equity in your home, it is less damaging than a foreclosure and there are some IRS tax benefits under the Mortgage Forgiveness Debt Relief Act of 2007; contact the IRS for more information.

10 Tips to Avoid Foreclosure:
  1. Open all letters from your lender; the further behind you become the more likely you are to have your house foreclosed.
  2. Contact you lender immediately; usually the lender does not want your house, rather they want to work with the borrower.
  3. Respond to all letters from your lender, failure to open them is not an excuse in foreclosure court.
  4. Read your mortgage documents and understand your rights. 
  5. Understand how you can take steps to prevent foreclosure.
  6. Contact an approved Colorado HUD counselor for guidance
  7. Prioritize your expenses and spending 
  8. Do you have that can be sold to help re-instate your loan? 
  9. Avoid for-profit Foreclosure Prevention Companies
  10. Avoid Scammers: for-profit Foreclosure Recovery Companies

It is strongly suggested that you find a reputable attorney to answer any legal questions. The information may help you to have a better understanding of how to manage debt, how it affects your credit score and provide answers to some of your questions, but it in no way serves to completely educate an individual on how to manage all types of debt.