Who’s at risk?

•     Homeowners who took out a  subprime loan with expectations of a  higher income but instead are  financially unprepared to pay their  new, higher rates

•      Homeowners who were first-time  buyers during the housing boom 10  years ago and took out mortgages  with creative financing they didn’t  understand

•      First-time homeowners who have  lived in their home for less than five  years

•      Homeowners who do not  understand their loan modification or  short sale options and until it’s too  late  believe they have no option  other than to foreclose

•      People struggling to pay monthly  bills who have already drained the  equity out of their homes through  refinancing
  

What does it mean? 

       Fixed-rate mortgage: Interest rate and payments do not change. 

       Balloon mortgage: Short-term, fixed-rate mortgage that involves small payments over a fixed period
       of time and then a final payment for the balance. 

       Interest-only mortgage: Borrower only pays interest for a fixed period from five to 10 years. None of
       the principal is paid off during this time. 

       Adjustable rate mortgage (ARM): A mortgage where the interest rate changes periodically: 

               3/1, 5/1, 7/1, 10/1: Rate is fixed for three, five, seven or 10 years and adjusted each year
               afterward.     
               3/6 or 5/6: Rate is fixed for three or five years and adjusted every six months afterward.
               1-month: Rate adjusts every month after first payment.
               Option ARM: Borrower can select a payment type each month: minimum, interest-only or fixed 
               amortized payment. 

       Reverse mortgage: A loan available to seniors that allows them to convert the equity in their home to
       cash. Repayment starts when the homeowners sell the home or move into a retirement or nursing home.

What happens when you can't pay?

A lender charges a late fee if the payment is 15 days late.

Once a payment is 30 days late, a lender can send a notice of default.

If the borrower does not work out a payment plan with the lender within 90 days, the lender can foreclose.

After official notices and a court hearing, the home is sold at a public auction to pay off the mortgage debt.

The new owner can evict the borrower from the home.

The entire foreclosure process usually takes about six months.

Source: : Mass. Housing and Finance Agency

Take a quiz about avoiding foreclosure here.

Find out foreclosure rates for Massachusetts towns by going to  this Federal Reserve of Boston map and scroll over your town.