In order to be able to buy a home, most people take out loans.   The most common type of loan is a mortgage.  A mortgage gives the lender (the "mortgagor") a legal interest in the home the borrower ("the mortgagee") is purchasing.  A mortgage requires the borrower to make regular (usually monthly) payments.  If the borrower does not make the required payments, the lender can foreclose or take legal ownership or control of the home.

In the District of Columbia lenders use an arrangement called a "deed of trust" instead of a mortgage agreement. The deed of trust generally works the same as a mortgage.

Unfortunately, some mortgage lenders are dishonest. These lenders are often known as "predatory lenders."   Predatory lenders often target borrowers facing unemployment and/or foreclosure because they are desperate to find any solution to their financial problem. 

Some unscrupulous lenders engage in predatory lending practices that make it more likely that a borrower will lose his or her home to foreclosure.

Here are a few of those practices:

• making a mortgage loan to an individual who does not have the income to repay it,
• charging excessive interest, "points," or other fees,
• repeatedly refinancing a loan without providing any real value to the borrower
• providing "second" mortgages - a mortgage in addition to and on top of the first and principal mortgage. 

    Other scams to watch out for:

o        Equity skimming: a buyer offers to repay your mortgage or sell the property if you sign over the deed and move out. 

o        Phony counseling agencies: offer counseling for a fee when it is often given at no charge. 

o        "Foreclosure rescue specialists":  they may offer to lend you the money to save you from foreclosure, but some are tricking homeowners into selling their homes for much less than the real value.

Remember:  Do not sign anything you do not understand. It is your right and duty to ask questions.

For more information about Predatory Lending go to:

http://www.hud.gov/offices/hsg/pred/predlend.cfm

http://www.freddiemac.com/homebuyers/bank/pred_lending.html

http://www.dontborrowtrouble.com

You can find out how to contact your lender by looking on your monthly mortgage billing statement or your payment coupon book.

When you call your lender, you want to be able to inform your lender about the details of your loan and information about your income and expenses.  Have this information ready:

 - Your loan account number;

- A brief explanation of your circumstances and problems;

- Recent income documents, such as pay stubs, benefit statements from Social Security, Disability, Unemployment, Retirement, or Public Assistance. If you are self-employed, have your tax returns or a year-to-date profit and loss Statement available for reference.

- A list of your household and other expenses.

** Expect to have more than one phone conversation with your lender.  Usually, your lender will mail you a "loan workout" package. This package contains information, forms, and instructions.  If you want to be considered for a workout program, you must complete the forms and return them to your lender quickly. The completed package will be reviewed before the lender talks about a solution with you.

If you find that you are unable to keep your mortgage payments current, there may be a program available to fit your particular situation.  Check with your lender to find out what options may be available.

Here are some likely options if your money problems are temporary:

1. Reinstatement: Your lender likely will want to discuss accepting the total amount owed in a lump sum by a specific date. They most often will combine this option with a Forbearance.

2. Forbearance: Your lender may allow you to arrange for a reduction or suspension of payments for a short period of time after which another option must be agreed upon to bring your loan current. This option is most appropriate to combine with a Reinstatement when you know you will have a source of funds to bring the account current by a certain date. 

3. Repayment Plan: You may be able to work out an agreement where you would resume making your regular monthly payments, in addition to a portion of the past due payments each month until you are caught up.

Here are some options if your money problems are long-term or will permanently affect your ability to bring your account current:

1.  Mortgage Modification: If you can make your payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to lower the monthly amounts you pay.  That will not lower the total loan amount, and may increase interest payments over time, but it may make the monthly payments affordable.

Your loan could also be modified in one or more of the following ways:

*    Adding the missed payments to the existing loan balance.

*    Changing the interest rate, including making an adjustable rate into a fixed rate.

*    Extending the mortgage loan term.

2. Claim Advance: If your mortgage is insured, you may qualify for an interest-free loan from your mortgage guarantor to bring your account current. The repayment of this loan may be deferrable for several years.

o        Pre-Foreclosure Sale or Short Payoff: If the property's sales value is not enough to pay the loan in full, your lender may be able to accept less than the full amount owed as settlement for the account. This option can also include a period of time to allow your real estate agent to market the property and find a qualified purchaser. Money assistance may be available to satisfy additional lien holders (other people owed money who have a right to your property) and/or help toward paying some moving costs.

o        Assumption: A qualified buyer may be allowed to assume your mortgage, even if your original loan documents say that it is non-assumable.

o        Your lender may agree to allow you to "give back" your property as settlement for the debt.

If your property has been damaged due to a natural disaster, or if you are called up for active military duty, there may be additional assistance available.  For additional information for victims of a declared Natural Disaster area, please visit:

http://www.hud.gov/offices/hsg/sfh/owning.cfm

For people called to Active Military Duty, or other military personnel with questions, please visit:

http://www.hud.gov:80/offices/hsg/sfh/faqs/qasscra1.cfm

The federal government (HUD) has a toll-free number for servicemen and women with questions concerning their mortgage. For more information, call 1-888-297-8685 between the hours of 7 a.m. and 7 p.m. Central Standard Time on weekdays.

Yes, you will usually get notice if your lender is going to foreclose on your home.  In the District of Columbia, lenders generally use a standard form of deed of trust that requires notice to the borrower by mail.  If that deed of trust form is used, the notice will include the following information:

• what the lender claims the borrower has failed to do - usually that the borrower has not made required monthly payments; 
• what the borrower must do to hold off foreclosure - usually, make the payments that are owed; and
• a date at least 30 days in the future during which the borrower can "cure" the problem, as by making payments. 
• If that cure does not occur, then generally all the money that was to be paid to the lender in monthly payments in the future will be immediately due on the stated date, along with interest and costs.  The speeding up of payments is called "acceleration."  Usually, depending on the form of the deed of trust, the lender sends a notice of acceleration, including advice on when the accelerated loan - the entire amount of the loan - must be paid to avoid foreclosure. 

Whether or not these notices are used, another and later form of notice is required by the D.C. Code, as discussed below.

o        Under D.C. law the lender may move forward to sale without court supervision.    (Although some states require the lender to start a court proceeding before they sell your home, D.C. does not.)

o        D.C. Code requires that the lender send another kind of notice of foreclosure to the borrower/homeowner by registered mail, return receipt requested, with a copy to the D.C. Recorder of deeds.  The notice must be sent at least 30 days before actual sale of the home, and must be after any of the early notices that give the borrower/homeowner a chance to "cure" the problem by making payments or other arrangements.  Depending on the form of the deed of trust, this notice may be the only written notice the borrower/homeowner gets.

o        The D.C. law presently does not have requirements for advertising, but the usual practice is to advertise for about 10 days prior to the sale in a newspaper like the Washington Post or the Afro American.

** The borrower/homeowner may reinstate the loan by curing any loan defaults, as by making all payments that would be due if no acceleration had occurred.  The borrower must also pay the lender's costs of starting the foreclosure, and take certain other steps to protect the lender's interests.  These steps must be taken quickly, generally either before the fifth day before the foreclosure, or before entry of a judgment enforcing the deed of trust (whichever comes first).  A lawyer's advice is useful in working through the requirements.