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FHA Foreclosures

Foreclosure

Relief options with FHA foreclosures

The Federal Housing Administration (FHA) enables thousands of American families to take their first step onto the property ladder every year, but many homeowners with FHA-insured loans still end up losing their homes as a result of FHA foreclosures.

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Most FHA foreclosures result from non-payment of home loans and mortgages and many foreclosures could be avoided if homeowners took advantage of some of the relief options offered by the US Department of Housing and Urban Development (http://www.hud.gov), the body which oversees the FHA Loan Scheme.

The FHA has a vested interest in helping homeowners avoid foreclosure. When a borrower defaults on an FHA-insured loan, the lender who finances the loan receives compensation from the FHA Insurance Fund. The FHA must then take ownership of the property and sell it on to recover its losses.

Put simply, foreclosures cost lenders money. Most companies would prefer to renegotiate the loan and keep the homeowner as a paying customer. In many cases, the borrower and lender can come to a new financial arrangement that enables the borrower to escape foreclosure and keep their home. This is known as loss mitigation.

However, this can only be arranged through negotiation between the FHA, the lender and the borrower. It is essential to make contact with your lender as soon as possible to discuss the available options. You will get nowhere by ignoring the lender's letters and phone calls.

If you are having trouble paying off an FHA-insured loan, HUD can put you in touch with an approved housing counseling agency who can advise you about loss mitigation. See the HUD website or call tel 800 569-4287 for listings of HUD-approved agencies in your area. You may be able to arrange a new payment plan or modify your existing mortgage to take care of the outstanding debt - see How to Stop Foreclosure for more on these options

Borrowers of FHA-insured loans may be eligible for partial payment in the form of a one-time cash loan from the FHA Insurance Fund to bring their account up to date. To qualify, borrowers must be four to 12 months behind with loan repayments. The payment is interest free, but it must be repaid in full when the first mortgage is paid off or when the home is sold.