#4 Know Your Options
Understanding Your Options
In this current economy no one wants to see another American lose their home. For most families, a home is not only a significant financial investment but also a source of pride. The loss of a home can be both financially and personally devastating. Contrary to popular belief, your lender does not want to foreclose on your home. Foreclosure is an expensive process, and once a property is foreclosed upon, the lender must then turn around and resell it themselves at even more expense. Lenders are not in the real estate business, they are in the lending business. They would much rather work out a solution that allows you to keep your home or sell it on your own, than to have to add it to the already overflowing inventory of real estate owned by them.
How much time do I have?
Whether you have already fallen behind in your mortgage payments or just see trouble coming down the road with a payment you can’t afford, it does not mean you must go through foreclosure. What it does mean is that you should reach out for professional help immediately. If you have are facing rising mortgage payments or loss of income, you may be able to avoid keep your home or avoid foreclosure by selling it yourself – – if you know the right steps to take.
With the right help, virtually any foreclosure situation can be successfully resolved. There are options worth exploring with your lender that may allow you to keep your home at best, or at worst to negotiate a property sale that will keep you out of foreclosure. But you need to act swiftly. It’s much better to call for help as soon as you see trouble coming, rather than waiting until you’re up to your neck in quicksand.
When facing even the possibility of foreclosure you need to act with all speed. How devastating to look back on a home foreclosure and realize you didn’t do all you could to avoid it. If you’ve already missed a payment in Georgia, you really don’t have long to act. Once you’ve missed a mortgage payment time becomes your enemy! If your house payments are more than a month behind, your lender may already have started foreclosure proceedings. And as time passes, thousands of dollars in penalties and legal fees can be added to the balance you owe. Every single day that you are in default extra interest and penalties are added! The longer you wait, the harder it is for a housing counselor, real estate professional or distressed property expert to help you. You must act fast to protect your rights.
Many people facing foreclosure simply do nothing and hope for a miracle. What a big mistake! Falling into that trap could cost you your house, your credit, and your self-respect.
What Are My Options When I Can No Longer Afford My Mortgage Payments?
Here’s the question facing every distressed property owner who can no longer make their mortgage payments. Will I allow this situation to wipe me out? Or will I do all that is in my power to work it out?
Walking away is never a good idea. The financial repercussions will follow you for years to come. Instead, contact your lender as soon as you realize you aren’t going to be able to continue your current payment, and consider every avenue of work out before you consider wipe out. As I’ve stressed before, lenders are in the loan business. Generally, they don’t want your house. They’d rather work it out if at all possible. They have entire departments set up to work with you, called Loss Mitigation. The loss mitigation specialist’s whole job is to reduce loss to the lender by keeping you in your loan if at all possible.
Communication is Key
So, start by contacting your lender at the first sign of trouble. They have work-out options to help you. You can usually find your lender’s contact information on your monthly billing statement or payment coupon book. Have your loan account number ready, as well as a brief explanation of what has happened to change your circumstances. Before you dial, gather such supporting documentation as pay stubs, your household budget, tax returns or a recent profit and loss statement if you are self-employed, and recent benefit statements from Social Security, disability, unemployment, retirement, or public assistance if these apply.
Don’t Let Emotions Get in Your Way.
Many Americans don’t know how to discuss money problems with others. We’ve often been raised not to talk about such things. But don’t let such thinking get in your way, and don’t delay the inevitable. If you don’t contact your lender, they’ll surely contact you, only then you may have much less time for bargaining. You must begin this conversation with your lender as soon as possible. Don’t be embarrassed or think that if you disclose your situation, the lender will rush to set the debt collectors on you. As discussed earlier in this book, lenders would much rather work with you to salvage your performing loan than to go to the trouble and expense of a foreclosure and resale. Besides that, HUD and private mortgage insurance companies and investors like Freddie Mac and Fannie Mae now require lenders to work aggressively to help borrowers facing money problems. And if one of the work-outs we are about to discuss won’t help your situation, most banks would rather you sell the property yourself pre-foreclosure than for them to have to take it back and sell it themselves.
But, if you don’t get in touch with your lender, they will certainly start contacting you by letter or phone soon after you miss a payment. What most people don’t realize is that they are calling to offer assistance. If you are having a problem paying, they want to know about it. That’s why it is so important to answer those letters and take those calls, to keep the conversation going. If your lender doesn’t hear from you, they will have to start legal action leading to foreclosure. This will greatly increase the cost to bring your loan current. The farther you are behind in payments, the harder it is to work it out with the lender, so please do get started in this process as early as possible.
Once you start the communications, your lender will typically mail you a “loan workout” package containing information, forms and instructions. If you want to be considered for assistance you must complete the forms fully and truthfully and return them to your lender quickly. Most of the people I know who failed to get a work-out also failed to provide complete information as requested. Do your best to comply with their request. Your lender will then review the complete package in order to devise a solution with you. Solutions may include mortgage modifications (changes), special forebearances (allowances), and other actions you can take to avoid foreclosure.
Get Professional Help
If you don’t feel comfortable talking with your lender, get someone to talk for you. A Certified Distressed Property Expert or Short Sale Specialist knows how to communicate with your lender’s loss mitigation department on your behalf to help you work-out your mortgage problem.
If you have a FHA or VA loan, you should locate a local housing counseling agency in your area and make an appointment to meet with a counselor. Most FHA counselors are free or cost very little, and can help you:
- Review your financial situation, determine what options are available to you, and negotiate with your lender
- Call the lender with you or on your behalf to discuss a workout plan
- Provide budget counseling to protect you from future credit problems before you get too far behind on mortgage payments
- Give you information on services and programs in your area that provide financial, legal, medical or other assistance
Here’s what I learned about these agencies from the website of the Department of Housing and Urban Development (HUD): A good counselor will help you create a monthly budget plan to ensure you meet all your monthly expenses, including your mortgage payment. Your personal financial plan will clearly show how much money you have available to make the mortgage payment. This analysis will help you and your lender determine whether a reduced or delayed payment schedule could help you.
To find out more about these agencies and their services, please call HUD toll free (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern Standard Time (6:00 a.m. to 2:00 p.m. Pacific Time). The same number can give you an automated referral to the three housing counseling agencies located closest to you.
Besides speaking with your lender or an FHA housing counselor, you may want to contact a nonprofit consumer credit counseling agency that specializes in helping restructure credit payments. Credit counselors can often reduce your monthly bills by negotiating lower payments or long-term payment plans with your creditors. Trustworthy non-profit credit counseling agencies provide their services free of charge or for a small monthly fee tied to a repayment plan. Beware of credit counseling agencies that offer counseling for a large upfront fee or donation. Such companies often prey on distressed homeowners.
For more consumer debt advice, contact www.debtadvice.org/
There are Many Ways to Work it Out:
If there is any way that you can keep you current mortgage, that is by far the best solution for most people. However, if you have a hardship that makes it unable to continue with your payments, there are ways out. If you are ready for a personal consultation, don’t hesitate to call me.
Elva Branson-Lee, Georgia real estate specialist, CDPE
770-475-1130 ext 8889