What If I'm Behind On My Mortgage? (continued)
Keeping Your House
If you want to keep house, there are multiple options here as well. You should expect the process to be stressful, but if you stick with it and cooperate with the lender, you may be able to stay. At some point in the process, you will need to resolve the underlying cause of your mortgage problems. If you got behind because you lost your job, you will need to be working. If your problems stem from a divorce, you will need to demonstrate that you can make payments on your own.
One of your first temptations will be to pay someone to help you. With rare exceptions, this can be a major mistake. Most lenders have departments set up to work with borrowers in hardship situations, and Maryland law requires lenders to pursue alternatives to foreclosure before foreclosing on a property. If you do need someone to help you, there is free assistance available. A list of FREE HUD-certified counselors can be found at www.HUD.gov. There have been numerous borrowers who have paid for help from organizations and individuals that weren't very effective (or in some cases, just took their money). To make things worse, the borrowers gave up resources that could have been used towards a solution to their hardship.
If you think there is even a remote possibility of needing assistance from your lender, keep ALL financial documents. Don't throw away pay stubs, bank statements, leases, W-2's, 1099's or tax returns. If the bank requests information and you don't have it, that may prevent approval for hardship assistance. You will probably need to send copies of original documents (don't send the originals). The lender may not accept online printouts.
Be prepared to make sacrifices. You may have to give up some luxuries, treats and habits to keep your house. It might be best to skip the vacation, if you won't have a house to come back to. If you have a $500 a month cigarette habit, you may need to decide if your cigarettes or your house is more important. Groceries can be budgeted. Heating and air conditioning expenses can be cut. You may be able to spend less on entertainment, gas, cable TV and telephone (but make sure you have a number where they can reach you). Keep receipts and a careful record of everything you spend money on, so you can figure out your actual budget and determine where you can make cuts.
Don't be defiant. Just like in a short sale, the process can be frustrating, but again, if you don't cooperate, your file can be closed. If your file is closed because the lender did not receive information (whether you sent it or not), send the requested information and then contact the lender to request that your file be reopened. You may receive a letter suggesting that the lender considers the matter closed, but that doesn't mean it really is. Make sure the lender has received everything they need, and if they say that they have, make sure that your file has been reopened. Foreclosure proceedings will not stop while your file is open, but they can move faster when your hardship assistance file is closed.
Make sure you know what is happening with your file. There have been many cases where a file has been closed, and the homeowner was not aware of it. Lenders are under pressure from the federal government and from Fannie Mae & Freddie Mac to get through files quickly, and this pressure is passed on to their employees. One way they can get through a file quickly is by closing it down. If the file is reopened, it is treated like a new request for assistance, so lenders can report they are getting to people quickly, when they may actually be taking a year or more to help someone.
Be aware that any temporary agreement to skip payments or lower your payments WILL make you delinquent (or more delinquent), and WILL affect your credit (even if the representative on the phone tells you it won't). If you follow the temporary agreement with a permanent agreement to bring your loan current, that can be a good thing, but you have to qualify for the permanent agreement. If you got into trouble because you lost your job, and you're still unemployed, you may not get that permanent agreement. On top of that, you will go back to owing your regular monthly payment, plus additional money. Most likely, you will sign an agreement that says you will need to bring yourself current if a permanent agreement can not be made. Analyze your situation and think ahead, so you can make the best decision for yourself.
Remember that the counselor assigned to you may be working with hundreds of people. If you can, include a cell phone number in your application and keep it with you at all times (but don't do anything that will cost you your job). It may be easier for your counselor to reach you, then it is for you to reach them, and they may get more phone messages than they can return. The best thing you can do to help yourself is to answer the phone when the lender's negotiator calls.
©Copyright 2011 Douglas R. Barry