For many homeowners, their home is their biggest asset. To protect it, homeowners struggling to make mortgage payments should know their rights and act fast to work with their mortgage servicers to find solutions.
Click the links below to learn more about topics of interest to California homeowners:
Foreclosure
Foreclosure Prevention Options
When a homeowner cannot keep up with mortgage payments, the lender may foreclose on the home. Since foreclosures can have devastating consequences for families, it is important that homeowners struggling to make their mortgage payments work with their servicer to find a solution. Foreclosure can be a fast-moving process, so if you are struggling to pay your mortgage, please contact your servicer immediately to ask about your options and how to apply. Do not ignore phone calls or mail from your servicer.
A HUD-approved housing counseling agency can help assess your situation and prepare for discussions with our mortgage servicer. To find a HUD-approved housing counseling agency near you, see HUD’s database for Foreclosure Avoidance Counseling or call 888-995-HOPETM (4673).
The options available to you may depend on a number of factors, including but not limited to your delinquency status and ability to repay any missed mortgage payments, whether your loan is federally insured, and the identity of your lender.
Some home-retention options to discuss with your servicer may include:
- Loan Modification: You and your mortgage servicer agree to permanently change one or more of the mortgage contract terms to make your payments more manageable for you. Modifications may include reducing the interest rate, extending the loan term, or adding missed payments to the loan balance. A modification also may involve reducing the amount of money you owe on your primary residence by forgiving or canceling a portion of the mortgage debt.
- Repayment Plan: Your servicer gives you a fixed amount of time to repay the amount you are behind by adding a portion of what is past due to your regular payment. This option may be appropriate if you’ve missed a few payments and can temporarily make higher monthly payments.
- Forbearance: Your mortgage payments are reduced or suspended for a period of time. Note, however, that interest may continue accruing during a period of forbearance, and that you will need to repay reduced or missed payments when your forbearance ends. Before your forbearance ends, it is important that you work with your servicer to put a post-forbearance exit plan in place. For example, you might resume making your regular payments along with a lump sum payment, or make additional partial payments for a number of months to bring the loan current. Forbearance may be a helpful option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly), but not if you cannot afford to pay your mortgage on a longer basis.
- Deferral: Your servicer moves past-due mortgage payments (principal and interest) to the end of the loan as a non-interest bearing balance. Deferring missed payments does not affect your monthly rate or the overall length of the loan. The balance is due at the maturity date, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing balance of the loan. Deferral may be a good option for those facing temporary financial setbacks.
- Reinstatement: You pay the loan servicer the entire past-due amount after a delinquency (or the end of a forbearance plan), plus any late fees or penalties, by a certain date. This option may be appropriate if your problem is paying your mortgage is temporary.
Homeowners who are so behind on payments that they cannot keep their home should discuss foreclosure alternatives with their servicer, such as:
- Short sale: The servicer agrees to allow you to sell your home for less than the outstanding mortgage debt. The servicer must approve the sale and will receive all the proceeds. This process can be preferable to foreclosure since, among other things, it allows you to stay in your home until the sale’s completion and has a less negative impact on your credit score.
- Deed in lieu of foreclosure: You agree to transfer your home to your lender, who agrees to release you from your mortgage obligations. Like a short sale, this has a less negative impact on your credit score compared to foreclosure.
Resources and Assistance to Avoid Foreclosure
If you are struggling to pay your mortgage, please contact your mortgage servicer immediately and ask about your options for avoiding foreclosure and how to apply. Do not ignore phone calls or mail from your servicer.
Contact a HUD-approved housing counseling agency, which can help assess your situation and help you prepare for discussions with your mortgage servicer. To find a HUD-approved housing counseling agency near you, access HUD's database for Foreclosure Avoidance Counseling or call 888-995-HOPETM (4673).
For additional hardship assistance information, visit the California Housing Finance Agency’s Hardship Assistance Information page at www.calhfa.ca.gov/myaccount/hardship/index.htm.
Homeowner Rights in the Foreclosure Process
California law provides you with important rights during the foreclosure process. For example, a servicer cannot file a notice of default (which starts the foreclosure process) until thirty days after making a diligent effort to contact you to discuss foreclosure alternatives. (Cal. Civ. Code, § 2923.55.) In addition, if you request a loan modification or other foreclosure prevention alternative, your servicer generally must provide you a guaranteed Single Point of Contact (SPOC) to communicate with you about deadlines, coordinate receipt of required documents, access your current and accurate loan information, and consider you for all foreclosure prevention alternatives. (Cal. Civ. Code, § 2923.7). Additional protections are also available. Learn more about your rights under the Homeowner Bill of Rights here.
Loan Modification & Foreclosure Scams
What They Are
- A loan modification is a restructuring of your mortgage in which you and your lender agree to modify the terms of your home loan. In a loan modification, your lender may defer some of your payments, change your interest rate, extend the length of the loan, or forgive or cancel a portion of the mortgage debt.
- You can apply for a loan modification or other mortgage assistance on your own or with free help from a HUD-approved counseling agency. To find a HUD-approved housing counseling agency near you, go to To find a HUD-approved housing counseling agency near you, access HUD's database for Foreclosure Avoidance Counseling or call 888-995-HOPETM (4673). Check out Resources and Assistance to Avoid Foreclosure for other resources to help you keep your home.
- Beware of loan modification and foreclosure rescue scams. Mortgage rescue scammers falsely claim they can get you a loan modification or other relief to avoid foreclosure. Some may pretend to be affiliated with a government agency or a housing assistance program. Others falsely claim to provide legal representation, “predatory lending investigations,” or “forensic loan audits” of your mortgage paperwork. These companies may claim that by using their services, they can pressure your lender and negotiate a “good deal.” Unfortunately, these operations often fail to obtain the relief they promise, and some companies take payments upfront and make little or no effort to help consumers.
- No person or company—including attorneys, foreclosure consultants and real estate agents—can demand advance payment for providing loan modification services in California. (Cal. Civ. Code, §§ 2944.7 and 2945.4; Cal. Bus. & Prof. Code, § 10085.6, subd. (a).) This means that a company or individual cannot obtain payment from you until after they perform all the services promised in your contract or agreement. In addition, mortgage foreclosure consultants who offer to stop foreclosure or assist you with obtaining a modification or other relief are required to register with the Attorney General and post a $100,000 bond. (Cal. Civ. Code, § 2945.45.) Search for the name of a foreclosure consultant to find if they are registered at Is Your Foreclosure Consultant Registered?
Tips to Avoid Scams
- Know who you’re dealing with. Some scammers pretend to be working with your lender, mortgage servicer, or the government to get money or personal information from you. If someone reaches out to you offering services or asking for payment, make sure they really are who they say they are before you make any payments, give out any information, or sign any documents. If you have any doubts, contact the agency or company directly by looking up their information online.
- Don’t pay up-front fees for loan modification services. Foreclosure consultants and other companies offering loan modification services are legally prohibited from collecting money before services are performed. Avoid any company that demands an up-front fee before providing services.
- Don’t transfer title or sell your house to a “foreclosure rescuer.” Beware that this is a scam to convince homeowners they can stay in their homes as renters and buy their homes back later. It might also be part of a fraudulent bankruptcy filing scam. Either way, once a scammer has the title to your home, they can evict you and keep the home for themselves.
- Don’t pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants should not advise you to redirect mortgages payments to their company, as they often keep the money for themselves. Never trust anyone else to make your mortgage payments for you.
- Never sign documents without reading them first. Many homeowners think they are signing documents for a loan modification or new loan to pay off the mortgage that they are behind on. Later, they discover that the paperwork they signed transferred their home ownership to someone who is now trying to evict them. Help yourself avoid this situation by taking your time to read through all documents before signing anything.
- Be suspicious of any guarantees to stop the foreclosure process — no matter your circumstances. Only your mortgage lender or servicer has the discretion to stop foreclosure and grant a loan modification. No third party can guarantee or pre-approve your mortgage modification application.
- Avoid dealing with “attorney-backed” businesses or law offices that refuse to provide an attorney’s name or State Bar number. If an attorney-backed business or law office declines to provide essential information regarding the attorneys that work for them, they are likely hiding something. To protect yourself from shady actors, work only with attorneys you can verify using the State Bar of California’s Attorney Search.
- Avoid companies offering “forensic loan audits” or “predatory lending investigations.” Predatory lending investigations and forensic loan audits analyze your mortgage loan file to determine your original lender’s compliance with state and federal mortgage lending laws. Scammers often make false claims regarding these services, such as claiming that the audit is 100 percent free when it is not or that it will provide you with the leverage you need to stay in your home – even if it is not true.
- Work with licensed/registered companies. You should always verify the license of anyone servicing or negotiating your mortgage loan’s terms. Mortgage lenders and servicers must be licensed by the Department of Financial Protection and Innovation. You can verify whether a company is licensed by using the Department of Financial Protection and Innovation’s financial services and mortgage lending licensees search tool. Most mortgage foreclosure consultants who offer to stop foreclosure or help you get a loan modification or other mortgage relief must register with the Attorney General. You can verify whether a foreclosure consultant is registered by using the California Department of Justice’s Is Your Foreclosure Consultant Registered? database.
Reporting Consultant Fraud
If you believe you were defrauded by a foreclosure consultant, or a foreclosure consultant did not do what they promised to do, you may file a complaint with the following agencies:
You may also consider filing a small claims court action. In small claims court, you represent yourself, and a judge resolves disputes of up to $10,000 quickly and inexpensively. Visit the California Courts Self-Help Center for further information.
Frequently Asked Questions
I am behind on my mortgage payments or think I may be soon. What should I do?
If you are having trouble paying your mortgage or have received a foreclosure notice, contact your lender or loan servicer immediately. You may be able to negotiate a new repayment schedule. Also, check out Resources and Assistance to Avoid Foreclosure.
I need immediate legal assistance. Who can help me?
You should consult with a private attorney. Visit the State Bar website for assistance in locating an attorney. If you can’t afford a private lawyer, you may be eligible for free or low-cost legal services. To find a legal aid organization near you, visit LawHelpCA.org. Members of the Armed Forces and their families can also get help from their local JAG legal assistance office. You can locate your nearest JAG legal assistance office by going to the U.S. Armed Forces Legal Services Locator.
Why am I getting collection or foreclosure notices about a second mortgage I haven’t heard about in years?
In the years leading up to the 2008 financial crisis, some lenders offered a “80-20” mortgage package. This “80-20” arrangement consisted of two separate mortgages: a first-lien mortgage, which financed around 80% of the principal balance owed, and a second-lien mortgage, which financed the remaining 20% and functioned as the down payment.
However, many homeowners did not realize that they took out two different mortgages. Even if they did, many homeowners who later refinanced or got a loan modification for one of their mortgages incorrectly believed that those adjustments carried over to the second mortgage. Many homeowners who went through bankruptcy similarly may have thought that the proceedings discharged all of their mortgage obligations. Some lenders of the second mortgages stopped sending statements or otherwise communicating with homeowners, sometimes for years or until the present day, which allowed this misunderstanding to persist.
Some homeowners are now discovering that their second mortgages still exist. With home values rising, some lenders (or the companies that lenders sold their rights to) are starting to collect or foreclose on these “zombie” second mortgages. For some homeowners, a foreclosure notice might be the first communication they get about their second mortgage in many years.
Homeowners facing foreclosure on their second mortgages after years of silence from lenders should seek legal assistance. As in any proceeding challenging foreclosure, a homeowner may have defenses available, such as material noncompliance with California’s Homeowner Bill of Rights pre-foreclosure requirements. Depending on the factual circumstances, a homeowner facing foreclosure on a zombie second mortgage may have additional claims to fight foreclosure or reduce their financial liability. For example, lenders who charged off loans and sent borrowers a “Suspension of Statements & Notice of Charge Off” may not be permitted to collect interest for the period of the charge-off, and lenders who failed to communicate with homeowners for years may not be in compliance with disclosure requirements.
What is a reverse mortgage?
Reverse mortgages allow older homeowners (62 years and up) to take out a loan against the equity they have built up in their homes. With a reverse mortgage, instead of making monthly payments to a lender, homeowners receive proceeds from their loan through cash payments or a line of credit. The entire loan balance of a reverse mortgage typically becomes due when the homeowner dies or moves out of the home.
The only federally insured reverse mortgage is a Home Equity Conversion Mortgage (HECM), which is available through lenders approved by the Federal Housing Administration (FHA). Those considering a reverse mortgage should speak with a HUD-certified housing counselor, as a reverse mortgage may not be right for everyone. Since taking out a reverse mortgage ultimately reduces (as opposed to increases) a homeowner’s equity in their home, it carries risk. Plus, a homeowner with a reverse mortgage still has ongoing financial obligations, and can face foreclosure should they fall behind on tax, insurance, or HOA payments. For more information, and a list of HECM counselors, visit this page.
Those who are facing foreclosure on a reverse mortgage should consult a lawyer. In addition, spouses of reverse mortgage borrowers who are not listed on a mortgage and face a lender’s demand to repay should seek legal help.
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Is Your Foreclosure Consultant Registered?
