estate lenders who comply with FHA mortgage insurance loan requirements.

These loans are made at way above the lender-preferred 80 percent loan-to-value ratio.There are FHA loan programs that require as little as a 3 percent down payment on the part of the borrower. The lender is making as much as a 97 percent loan-to-value ratio loan. Talk about the lender wanting some mortgage insurance protection! Essentially, the FHA is the government version of private mortgage insurance (PMI). Lets look at some numbers.

Because of the amount of exposure the FHA has when it insures real estate loans, it has developed an extensive program to counsel borrowers who are on the verge of defaulting. We present some of this FHA counseling information here, in a question-and-answer format.

We have two purposes in mind. The first is for you to understand how the FHA thinks and operates. It wants to prevent a foreclosure from occurring. Second, we want you to see how the FHA presents its version of foreclosure options. You may glean some valuable information for your own foreclosure options presentation even if you are not dealing with an FHA owner.

Q. What happens when I miss my mortgage payments?

Foreclosure may occur. This is the legal means your lender can use to repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued. If that happens, you may not only lose your home, but you also would owe HUD an additional amount.

FHA-Insured Loan

Purchase Price Down Payment Mortgage Amount

$100,000 $ 3,000 $ 97,000

FHA Borrower Counseling

Q. What should I do?

1. Do not ignore the letters from your lender. If you are having problems making your payments, call or write to your lenders loss mitigation department without delay. Explain your situation. Be prepared to provide them with financial information, such as your monthly income and expenses. Without this information, they may not be able to help.

2. Stay in your home for now. You may not qualify for assistance if you abandon your property.

3. Contact a HUD-approved housing counseling agency. These agencies are valuable resources. They frequently have information on services and programs offered by government agencies as well as on private and community organizations that can help you. These services are usually free of charge.

Q. What are my alternatives?

You may be considered for the following.

Special Forbearance Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.

Mortgage Modification You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.

Partial Claim Your lender may be able to work with you to obtain a one-time payment from the FHA insurance fund to bring your mortgage current. You may qualify if the following applies:

1. Your loan is at least 4 months delinquent but no more than 12 months delinquent.

2. You are able to begin making full mortgage payments.

When your lender files a partial claim, HUD will pay your lender the amount necessary to bring your mortgage current. You must execute a promissory note, and a lien will be placed on your property until the promissory note is paid in full. The promissory note is interest-free and is due when you pay off the first mortgage or when you sell the property.

Pre-Foreclosure Sale A pre-foreclosure sale will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan.You may qualify if the following applies:

1. The loan is at least two months delinquent.

2. You are able to sell your house within three to five months.

3. A new appraisal (that your lender will obtain) shows that the value of your home meets HUD program guidelines.

Deed in Lieu of Foreclosure As a last resort, you may be able to voluntarily give back your property to the lender. This wont save your house, but it is not as damaging to your credit rating as a foreclosure. You can qualify if the following applies:

1. You are in default and dont qualify for any of the other options.

2. Your attempts at selling the house before foreclosure were unsuccessful.

3. You dont have another FHA mortgage in default.

Q. Should I be aware of anything else?

Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If youre selling your home without professional guidance, beware of buyers who try to rush you through the process. Unfortunately, there are people who may try to take advantage of your