Refinancing or borrowing to stop a foreclosure

When refinancing makes sense

Why it is hard once you are behind

• Conventional loans (Fannie Mae): your current mortgage has to be current when you apply, meaning no more than 45 days since the last payment you made. A loan is not eligible if any mortgage shows a payment 60 or more days late in the past 12 months.
• FHA streamline refinance: every payment made within the month it was due for the past six months, with no more than one 30-day late. If you had a forbearance, you must have finished it and made three payments in a row on time.
• FHA cash-out refinance: every mortgage payment made within the month it was due for the past 12 months.
• VA: a VA loan that is more than 30 days past due can be refinanced with VA's interest rate reduction loan only if VA approves in advance, after you explain the reason, show it has been fixed and qualify on credit. VA can also approve one in advance to prevent an imminent foreclosure. See VA loans.
• A second mortgage makes it harder: the second lender has to agree unless the new loan pays it off.

Foreclosure bailout loans

Protections on a high-cost loan

• The lender must give you special disclosures at least three business days before closing.
• The lender cannot make the loan until a HUD-approved counselor, who does not work for the lender, certifies in writing that you received counseling about it.
• The lender and the broker may not encourage you to default on your current loan.
• Most balloon payments, prepayment penalties, negative amortization and a higher rate after default are banned, and points and fees cannot be financed into the loan.
• Late fees are capped at 4 percent of the late payment, and only after 15 days.

Your three days to cancel

• On a refinance with a new lender, a home equity loan or a HELOC secured by your main home, you can cancel until midnight of the third business day after closing. Saturdays count as business days; Sundays and federal holidays do not.
• Cancel in writing. A phone call or visit is not enough. The notice counts when you mail it.
• The lender may not pay out the money until the three days have passed.
• It does not apply to the loan you used to buy the home, or to a refinance with the same lender unless you borrow extra money.
• You can give up the waiting period only for a real personal financial emergency, in your own dated, signed statement. The lender may not hand you a printed waiver form. Be careful: a lender that pushes you to waive it is a warning sign.
• Cancelling the new loan does not cancel the old one. You still owe your original mortgage.

Rescue loans and deals to walk away from

• A loan to bring your mortgage current where you are rushed through a stack of papers. The FTC warns that one of them may transfer your deed.
• An offer to take your deed and let you stay as a renter and buy the home back later. The buyback terms are often unaffordable, and you can be evicted.
• Any company that tells you to sign over title. The CFPB lists this as a sign of a foreclosure relief scam, and the FTC says that if you transfer the deed you are not likely to get it back.