Major players at the foreclosure table
Knowing who to deal with during the foreclosure process could save your home.
If your mortgage goes into default, or foreclosure, it’s a good idea to know all the players at the foreclosure table. More important, it’s helpful to know who’s representing whom.
When the home loan was originally signed for, the lender advanced monies to purchase or refinance a home. In return, the borrower signed a note or a contract to repay the loan, and a mortgage or a pledge of collateral. These two legal documents are usually lumped together and called a mortgage. After the closing, the lender, now known as the Investor, transfers the collecting of the payments to a servicer.
It’s the job of a servicer to make sure timely payments are made, as well as ensuring that property taxes and homeowners insurance is paid. For performing these services, the servicer is paid a fee. The servicer is the player at the foreclosure table whom the borrower will deal with the most during the foreclosure process. They make the collection calls, send the letters and payment demand and review for workout options. Often, a borrower will be assigned to a primary point of contact by the servicer who works with the borrower to resolve the delinquency.
During this time, the lender, now known as the investor, steps back and the borrower has little or no interaction with them. However, they’re still a critical player because the wording in the note and mortgage signed at closing can determine the guidelines or workout options during foreclosure.
If the investor is a GSE, or Government-Sponsored Enterprise, like Freddie Mac, Fannie Mae, FHA or the VA, they must work with the borrower under HAMP guidelines. If the investor is a private enterprise, they are not required to provide workout options. Whether a GSE or a private investor, the borrower must deal with their designated servicer.
Dealing with your servicer on your own can sometimes be frustrating. Documents submitted may get lost, your point of contact isn’t available and you don’t know the right questions to ask when you do reach them. This is where a housing counselor certified by HUD and/or MSHDA can help for several reasons:
- They know the ins and outs of the process and can explain them.
- They can help navigate through the process.
- A housing counselor can provide guidance before a mortgage goes into foreclosure.
- It’s highly recommended that clients ask for assistance at the first sign of financial trouble.
- Their services are free of charge if they work for a non-profit agency and can be invaluable during an already stressful time financially.
Though the investors, servicers and housing counselors are the major players at the foreclosure table, there are others that may play a part. An attorney may be hired by the lender to pursue foreclosure if a workout option isn’t found. In addition, a client might also decide to hire a legal representative though there will usually be a cost involved. Whichever path is most beneficial, it’s always good to know everyone’s role and to understand who they represent in the foreclosure process.
Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at MI Money Health website.
Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, go to either the MSU Extension events page or MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health.