Foreclosure is the legal process used by a lender to repossess a borrower's home if they fail to meet their loan obligation. Fairfax county has certified housing counselors who can work with homeowners when they are faced with foreclosure. Some of these prevention options include reinstatement, forbearance, repayment plans, and mortgage modifications.

1. Foreclosure Prevention Consumer Affairs Branch Fairfax County Department of Cable and Consumer Services fairfaxcounty.gov/consumer

2. Legal process used by a lender to repossess a borrower’s home if they fail to meet their loan obligation. If the debt is not paid, the lender will call the entire loan balance due and force a sale of the home. The lender may sell the home at a trustee sale if the borrower defaults on the loan. fairfaxcounty.gov/consumer Foreclosure

3. In Virginia, most residential loans are secured by a Deed-of-Trust. The Deed-of Trust secures your loan and names a trustee who has the power to sell the home if you default on the loan. Virginia is a non-judicial state. The trustee can sell the home without going to court. Once the home is sold at a Trustee’s sale, it is final. fairfaxcounty.gov/consumer Residential Loans

4. If foreclosure occurs, the lender takes over your home. You must move out. After foreclosure, you can still owe the lender money. If your home is worth less than the total amount you owe on the mortgage loan, a deficiency judgment could be pursued. fairfaxcounty.gov/consumer Foreclosure

5. You lose your home and all the money you invested in it. A deficiency judgment can be filed against you. If the lender cancels or forgives debt, it may be considered taxable income. Check with IRS for tax liabilities. fairfaxcounty.gov/consumer Avoid Foreclosure

6. A late charge notice is issued on the 17th day of delinquency. Collections and various other letters are sent between the 18th and the 37th day. On chronic accounts, collections begin as early as the 10th day of delinquency. fairfaxcounty.gov/consumer Foreclosure Timeline

7. Around the 37th day of delinquency, a HUD 1, and or a breach letter is issued. The HUD 1 letter provides seven business days for the borrower to respond. The HUD brochure is sent at this time also. The breach letter provides a 30-day reinstatement period. fairfaxcounty.gov/consumer Foreclosure Timeline

8. If the borrower cannot be reached, calls and “no contact” letters will continue from the 38th day to the 61st day. At 62 days delinquent, at three payments past due, the loan is assigned to a loss mitigation queue for a possible work-out. Over the next 10 days aggressive efforts are made to contact the borrower. fairfaxcounty.gov/consumer Foreclosure Timeline

9. Review your mortgage loan documents and be sure you understand the terms. Contact your lender or the company that collects your mortgage payments right away if you will have difficulty paying your mortgage. Explain your situation and ask what options are available. If you do not understand the options they offer, or if your lender is not helpful, contact a HUD certified housing counselor. fairfaxcounty.gov/consumer Don’t Ignore the Problem

10. Housing Counselors and Homeowners Are Partners Housing Counselor Will work with the homeowner to make realistic choices about homeownership. Assist homeowner in preparing a spending plan. Get exact totals on current payments, arrears, and loan balance from the lender in order to decide the best foreclosure avoidance plan. The housing counselor will be an advocate for the homeowner. fairfaxcounty.gov/consumer HUD Certified Counselor

11. Reinstatement The lender agrees to reinstate the loan if the homeowner makes up back payments in a lump sum by a specific date. A forbearance plan may accompany this option. Forbearance The lender may allow reduced or suspended payments for a short period of time, such as 3 or 4 months. Lender will work with the homeowner to create a repayment plan for the loan. The homeowner must show that they will have enough money to bring the account current at a specific time. Repayment Plan Allows the borrower to become current and catch up on missed payments based on the borrower’s circumstances. May include the regular payment plus a portion of the past due payments each month until the payments are caught up. fairfaxcounty.gov/consumer Workout Options: Short-Term

12. Mortgage modification When any term of the original loan contract is permanently altered. A reduction in the interest rate. Adding missed payments to the existing loan balance. Changing an adjustable rate to a fixed rate. Forgiveness of a portion of principal. Extending the number of years to repay. fairfaxcounty.gov/consumer Workout Options: Long-Term

13. Partial Claim: If the mortgage is insured by a private mortgage insurance firm, your lender may help you file a claim to get a one-time, interest-free loan to bring the account current. The interest-free loan is due when you refinance, pay off the mortgage or sell the property. fairfaxcounty.gov/consumer Workout Options: Long-Term

14. Home Equity Conversion Mortgage For older homeowners who have a significant amount of equity in their home. Enables the owner to stay in their home while using some of the built up equity. Homeowner can withdraw some of the equity in the form of monthly payments for life or a fixed term, or in a lump sum, or through a line of credit. Homeowner must be 62 years or older and have a very low outstanding mortgage balance or own their home free and clear. fairfaxcounty.gov/consumer Workout Options

15. If keeping your home is not an option Pre-foreclosure sale or short sale: When you can’t sell the home for the full amount of the loan and the lender is willing to accept an amount less than the amount you owe. Allows a borrower in default to sell their home when the value of the property has declined to less than the amount owed on the mortgage. The loan is at least 2 months delinquent fairfaxcounty.gov/consumer Workout Options

16. Pre-foreclosure sale or short sale: The difference between the sale of the home and the mortgage must be reported to IRS as income. Form 982 can be filed to show that the amount is for “forgiveness of a debt due to insolvency”. Check 1b on the form to be exempt from being taxed. The short sale option may not be available if you have other liens, such as other creditor judgments, second mortgages, and IRS or state tax liens. fairfaxcounty.gov/consumer Workout Options

17. Assumption: A qualified buyer may be allowed to take over your mortgage, even if your original loan documents state that it is non-assumable. Not all loans are assumable. If payments are behind when transferred, the new owner will be in default and subject to same collection efforts, unless there is a workout agreement. Former homeowner can still be liable for the note. fairfaxcounty.gov/consumer Workout Options

18. Deed-in-lieu of foreclosure: As a last resort, you may be able to "give back" your property to the lender and the balance on the loan is forgiven. Lenders have restrictions for taking back property. This will not save your house, but it is less damaging to your credit rating. There may be income tax consequences. fairfaxcounty.gov/consumer Workout Options

19. Bankruptcy: Bankruptcy is a legal action. Get assistance from an attorney. Litigation: Homeowner may decide to sue if they believe the mortgage holder made errors or if terms of the mortgage were abusive or predatory. fairfaxcounty.gov/consumer Workout Options

20. Contact the Fairfax County Consumer Affairs Branch for more information: 12000 Government Center Parkway, Suite 433 Fairfax, Virginia 22035 703-222-8435 TTY 711 www.fairfaxcounty.gov/consumer consumer@fairfaxcounty.gov fairfaxcounty.gov/consumer Contact Consumer Affairs