What are my most important mortgage documents?
When you take out a loan to buy a house, you will sign at least two documents: a promissory note, in which you promise to make regular payments on the loan, and a deed to secure debt (commonly referred to as a “mortgage”) which gives the bank the legal right to take away your house if you default on the note. The process of taking away your house after a default is called foreclosure.
The promissory note and the deed to secure debt will be cancelled on the day that you pay off your loan. Until then, those two documents spell out the rights and responsibilities that you owe to your lender, and that your lender owes to you. Make sure you know where your copies are, and read them.
Who holds my mortgage?
In the old days, you applied for a home loan from a bank, and that bank held your promissory note and deed to secure debt until the day the loan was finally repaid in full. Now, it is common for banks to buy and sell home loans. Your note and deed may be sold, transferred or assigned at any time to someone other than the bank which gave you the loan. This could be another bank, or even an institutional investor. If you are not sure, you have the right under federal law to write and ask for the name, address and contact information of the company that currently holds your mortgage. At the end of this webpage, you will find form letters that you can modify to fit your particular request.
What is a “loan servicer”?
A loan servicer is a company hired by the lender to handle the day-to-day business of communicating with homeowners, sending out bills and keeping track of payments, escrow accounts, insurance, property taxes and the like. The loan servicer is the company that sends you a monthly statement, and to whom you send your monthly payments. Not all lenders use a loan servicer; some lenders do their own loan servicing. To make things even more confusing, many of the largest loan servicers are also banks! The name and contact information of your loan servicer will appear on your monthly statement.
I want to file a complaint against my bank or servicer. Where should I send it?
Complaints against a bank or its servicer should be sent to the federal or state banking regulator with jurisdiction over that particular bank. This can be very confusing, since there are fifty State banking regulators and several federal bank regulatory agencies. For example, several of the biggest mortgage lenders – Wells Fargo, Bank of America, Citibank, and Chase – are national banks regulated by the federal Office of the Comptroller of the Currency. To file an online complaint against a national bank, go to: http://www.helpwithmybank.gov/complaints/
These websites can help you find out who regulates a particular bank:
What is a “loan modification”?
A loan modification is a written agreement between you and the holder of your mortgage to change the original terms of your mortgage (such as the length of the loan, principal balance, or interest rate). If you obtain a permanent loan modification, then your monthly payment may be reduced to a more affordable amount. You apply for a modification in much the same way that you apply for a loan, by providing personal and financial information, tax returns, proof of employment, etc. If your numbers meet the numerical formula used by the lender, then your application will be approved and your loan terms will be changed. If not, then your application will be denied, and you will still be bound by the terms of the original loan. Please be aware that in some cases, the length of the loan or the principal balance may be increased in return for a lower interest rate and monthly payment.
Some lenders allow homeowners to participate in a trial modification program while their application for a permanent modification is being considered. Please be aware that if your application for a permanent modification is denied, the lender may demand that you pay the difference between your original monthly payments and the trial program payments. Moreover, if the homeowner is delinquent in making payments under the trial modification program, it is almost certain that the application for a permanent modification will be denied.
Many lenders have their own loan modification programs, with their own formulas and requirements. The federal government’s Home Affordable Modification Program (“HAMP”) is designed to help homeowners who are experiencing a financial hardship. If you are found to be eligible for HAMP, then your loan may be modified to make your monthly mortgage payment no more than 31% of your gross monthly income. For more details on HAMP eligibility and requirements, visit www.makinghomeaffordable.gov.
But be warned: applying for a loan modification may not stop a foreclosure. There have been instances where homeowners have had their homes sold at foreclosure while their modification applications were still pending. You should take action immediately if you receive a notice that your home will be foreclosed on by the holder of the mortgage.
What is the “Making Home Affordable Program”?
The Making Home Affordable Program is a federal program administered by the United States Department of the Treasury and the Department of Housing and Urban Development. It offers several options for homeowners, some of which are available through private lenders, including:
- Refinancing mortgage loans through the Home Affordable Refinance Program (“HARP”);
- Loan modifications for first and second mortgage loans through the Home Affordable Modification Program (“HAMP”) and the Second Lien Modification Program (“2MP”);
- Providing temporary assistance to unemployed homeowners through the Home Affordable Unemployment Program (“UP”); and
- Offering other alternatives to foreclosure through the Home Affordable Foreclosure Alternatives Program (“HAFA.”)
To get more information on these programs, visit
I’ve been solicited by companies offering to help me obtain a loan modification or avoid foreclosure – are they for real?
Maybe … and maybe not. Many companies advertising these services are scam artists who steal money from distressed homeowners by taking upfront fees and not delivering on their promises. Here are some suggestions for identifying scams and what to do if you feel that you have been a victim:
- You should never pay a fee for assistance with or information about the Making Home Affordable Program.
- Beware of any person or organization that asks you to pay an upfront fee in exchange for a counseling service, foreclosure prevention, or modification of a delinquent loan.
- Beware of anyone who wants you to sign over the deed to your house in order to “save your home.”
- Beware of anyone who advises you to deliberately miss a mortgage payment.
- Never make your mortgage payments to anyone other than your mortgage holder, unless you have the mortgage holder’s approval.
To file a complaint or to get free information on fraud and other consumer issues, call the Homeowner’s Hope Hotline at 1-888-995-HOPE (4673) or contact theFederal Trade Commission at www.ftc.gov/consumerprotection or 877-FTC-HELP (4357). In addition to contacting the FTC, you may also wish to file a complaint with the Governor’s Office of Consumer Protection by calling 404-651-8600 or toll free at 1-800-869-1123. For more information about foreclosure rescue or loan modification scams, go to www.LoanScamAlert.org, www.ftc.gov/MoneyMatters, or http://www.occ.gov/news-issuances/consumer-advisories/2008/consumer-advi....
What can I do if my mortgage holder has made mistakes in my account, or if I need more information about my mortgage account?
The federal Real Estate Settlement Procedures Act, 12 U.S.C. Section 2605(e), gives you the right to request information about your mortgage account. It also gives you the right to demand that your account be corrected, if you believe the lender or servicer has made a mistake. At the end of this webpage are sample letters that you can use to request information, or to ask that the servicer correct your account. Be sure to clearly identify the name of the borrower as it appears on the servicer’s records, the account number, and the property address. Federal law requires that the lender or servicer acknowledge your letter within twenty days, and answer it within sixty days.
How does foreclosure work in Georgia?
Georgia is a “non-judicial foreclosure” state. That means the lender can foreclose on your home without filing suit or appearing in court before a judge. The procedures for foreclosure are spelled out in the Official Code of Georgia, Sections 44-14-162 through 44-14-162.4.
Foreclosure begins with a default under the terms of the original promissory note or deed to secure debt. Usually the default is your failure to make the required payments on the loan. A default can also occur due to things such as failing to maintain property insurance or pay your property taxes.
Next, the holder of your mortgage must send notice to the borrower of its intent to foreclose. The borrower will not get much advance notice – Georgia law requires that the notice be sent at least 30 days before the date of the proposed foreclosure sale. The notice must be in writing and include the name, address and telephone number of someone who has authority to negotiate, amend, and modify the terms of the mortgage with the borrower. The notice must also be sent to the borrower by registered or certified mail or statutory overnight delivery, return receipt requested and include a copy of the advertisement of the foreclosure sale that will be published in the official county newspaper for public announcements. Refusing to accept a notice sent by registered or certified mail is a bad idea; it will not invalidate the notice.
The holder of your mortgage must publish notice of the foreclosure in the official county newspaper for public announcements where the real property is located for four consecutive weeks prior to the scheduled foreclosure.
If it has not already done so, the holder of your mortgage must file proof that it owns title to the security instrument related to the real property with the clerk of the superior court of the county in which the real property is located, prior to the start of the foreclosure sale. This proof is usually in the form of an assignment of the promissory note and deed to secure debt. Since mortgages are often sold or assigned, this requirement may assist the borrower with identifying the current holder of their mortgage.
The foreclosure sale will take place on the courthouse steps in the county where the property is located. By law, foreclosure sales take place on the first Tuesday of the month between the hours of 10:00 a.m. and 4:00 p.m. Bidding is open to the public, but the mortgage holder often is the only bidder. The mortgage holder will sign a deed of foreclosure to the winning bidder, which may well be itself. At that point, the winning bidder becomes the new owner of the property.
What happens after the foreclosure sale has taken place?
A valid foreclosure wipes out the borrower’s right to live in the house. The new owner of the property may file a dispossessory action to evict the borrower from the home. Some lenders have a “cash for keys” program, in which they will pay homeowners a small amount to voluntarily leave the property.
In most cases, the mortgage holder accepts the property in satisfaction of the loan, and foreclosure marks the end of legal proceedings against the borrower. However, the holder of the mortgage may file suit against the borrower to recover any difference between the amount paid for the property at the foreclosure and the amount remaining on the promissory note. This is called a deficiency proceeding. If this happens, the matter will go before the courts.
If you believe that you have been the victim of a wrongful foreclosure, then you should seek legal advice as soon as possible from a private attorney or legal aid organization. If you do not have an attorney, you may wish to contact the State Bar of Georgia at 404-527-8700 or 1-800-334-6865 to obtain the telephone number for a referral service in your area. Alternatively, you may be eligible for free legal services. For those residing in the Atlanta metropolitan area (Clayton, Cobb, DeKalb, Fulton and Gwinnett counties), please contact the Atlanta Legal Aid Society at 404-377-0701. For all other Georgiacounties, please contact the Georgia Legal Services Program at 404-894-7707 or 1-800-822-5391.
What if I am a tenant in a home that has been sold at foreclosure?
Under the federal “Protecting Tenants at Foreclosure Act of 2009,” Pub. L. No. 111-22, 123 Stat. 1660, a tenant with a bona fide lease has the right to stay in the home after foreclosure, and must be given at least ninety days’ notice to move out. The Act does not apply if the tenant is the borrower, or a member of the borrower’s immediate family. It is scheduled to expire at the end of 2012.
What if I have lost my home in foreclosure and I cannot afford to live elsewhere?
The Georgia Department of Community Affairs has a number of home and rental assistance programs available for eligible Georgians. For more information, contact DCA at 404-679-4940 or toll free at 1-800-359-4663.
How can I avoid foreclosure?
Several options may be available to a homeowner facing foreclosure:
- Contact your lender or servicer and make arrangements to cure the default. Usually, this means making a cash payment to bring the loan current.
- Contact your lender or servicer and make arrangements for a “short sale.”
- Contact your lender or servicer and make arrangements for a “deed in lieu of foreclosure.”
- Consult a private attorney to see if a bankruptcy petition is advisable.
- Consult a private attorney to see if there are legal grounds to seek a restraining order.
Which options are available or appropriate for the homeowner will depend on the particular facts of the case. Although our office is prohibited by law from giving you legal advice, a private attorney or HUD-certified housing counselor may be able to help you. Some of these options are explained in more detail below. In all cases, though, you must act immediately after receiving notice of a foreclosure.
What is a short sale?
A short sale occurs when you sell your home for less than the balance remaining on your mortgage. It is important to understand that a short sale must be approved in advance by your lender. If it is approved, the holder of your mortgage agrees to accept the proceeds of the sale and to cancel the mortgage.
You may also be eligible for the federal government’s Home Affordable Foreclosure Alternatives Program (“HAFA,”) which offers short sale and deed-in-lieu options. For more details on HAFA eligibility requirements, visit www.makinghomeaffordable.gov.
What is a deed in lieu of foreclosure?
A deed in lieu of foreclosure is a legal document signed by the homeowner to voluntarily transfer ownership of the property to the lender in exchange for a release from the loan. This is sometimes referred to as “giving the property back to the bank.” This option is only available if the lender agrees to accept the deed and to cancel the mortgage.
In some situations, if your mortgage is owned by Fannie Mae, you may be able to lease your home after signing a Deed in Lieu of Foreclosure. Even if your loan is not owned by Fannie Mae, there may be a similar leasing option offered by your lender.
How can a bankruptcy petition help me?
Under federal law, the valid filing of a bankruptcy petition acts as a “stay” of legal proceedings against the debtor, including a non-judicial foreclosure. Such a petition will suspend the foreclosure proceedings if it is properly filed with the Clerk of the U. S. Bankruptcy Court before the property is sold on the courthouse steps. However, in some cases, the mortgage holder may seek permission from the bankruptcy judge to resume foreclosure proceedings. Moreover, if you want to keep your house, then you will have to continue paying the mortgage during the bankruptcy proceedings.
The filing of a bankruptcy petition has serious consequences. You should seek legal advice before making that decision to ensure that it is in your overall best interests.
Who can help me avoid a foreclosure?
You can find a nearby HUD-certified housing counselor online at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm or by calling 1-800-569-4287.
In the metro Atlanta area, the Consumer Credit Counseling Service of Greater Atlanta, the Fannie Mae Foundation, the Homeownership Preservation Foundation, NeighborWorks America, and the United Way have joined together to provide free counseling to Georgia homeowners to provide consumer education and to prevent home foreclosures. This foreclosure prevention program offers a toll-free 1-888-995-HOPE hotline. The hotline is staffed 24 hours a day by counselors who provide free, confidential advice for those facing foreclosure. Homeowners who want or need in-person counseling will be referred to local organizations. Counseling is available in English and Spanish. Visit their website at www.995hope.org.
The U.S. Department of Housing and Urban Development (“HUD”) and Fannie Mae have launched websites to assist borrowers who are having difficulty with their mortgages. HUD’s website is at http://www.hud.gov/foreclosure/index.cfm. While a good deal of this information may apply to all homeowners in danger of losing their homes, not all of the foreclosure avoidance options mentioned may be available to you if you have a VA or conventional loan.
Fannie Mae’s website is at http://www.knowyouroptions.com, and it provides information for all borrowers, whether or not Fannie Mae owns your loan.
If you are having trouble making your mortgage payments due to unemployment or underemployment, then you may wish to apply for assistance from the Georgia Department of Community Affairs' "HomeSafe Georgia"program. For more information, visit www.homesafegeorgia.com.
What preparations should I make before consulting a housing counselor or lawyer about problems with my mortgage?
The first step is to gather together all the documents pertaining to your mortgage, such as the documents from your loan closing and any subsequent closing, letters and mortgage statements, and records of payment. Fannie Mae offers a very helpful financial checklist to fill out before seeking help. To download a copy, visit:
Are there any special legal protections for active duty military personnel?
The federal “Servicemembers Civil Relief Act,” 50 U.S.C. Sections 501 through 596, limits the rate of interest that may be charged to military personnel on active duty, and imposes limitations on a lender’s right to pursue foreclosure or legal action. This Act applies to active duty military personnel who had a mortgage prior to enlistment or prior to being ordered to active duty, including members of the Army, Navy, Marine Corps, Air Force, Coast Guard; commissioned officers of the Public Health Service and the National Oceanic and Atmospheric Administration who are engaged in active service; reservists ordered to report for military service; persons ordered to report for induction under the Military Selective Service Act; and guardsmen called to active service for more than 30 consecutive days. Dependents of servicemembers also may be entitled to protections in some cases. For more information, please call the military information number at 1-800-342-9647, or visit HUD’s website at http://www.hud.gov/offices/hsg/sfh/nsc/qasscra1.cfm