Dealing With Mortgage Delinquency
After my interview on FOXbusiness.com yesterday with Gina Lee, Connell McShane, and Dagen McDowell, it was clear from the emails that there are many people dealing with catastrophic issues paying their mortgages and, of great concern, many are waiting for the government to intervene. to solve the problem. Although we hope to have useful answers and solutions tomorrow on what the government plans to do, there is still a period of time to enact those policies. In my experience, this takes time – something many people don’t have. Therefore, I feel that those who are struggling should continue to take steps in the meantime to prepare to alleviate their condition. For those who are in these situations, here are some simple steps to get started. More tips will be given:
1. Try to stay up to date. Foreclosure is devastating to a person’s credit and future access to credit, so we want to avoid it at all costs. Try to maintain the existing mortgage.
2. Create a budget: identify all income and all expenses to understand where the money goes;
3. Reduce and eliminate expenses: reduce as much as possible those expenses which are necessary (lower insurance premiums, reduced utility use and costs, revaluation of property taxes, budgets for food, clothing and transportation) and remove those which are not essential;
4. Add income or sell personal belongings: If necessary, find part-time work, extra income, or sell items that aren’t needed (through things like Craig’s List, etc.)
5. Negotiating Unsecured Debt Payment Plans: If the payments are still too high to afford the mortgage payments, negotiate adjusted payments with the unsecured creditors and immediately stop using credit cards and debt. Again, the desire to pay off debts, only on modified terms.
6. Determination of the Maximum Mortgage Payment Limit: Once you have completed all the previous steps, determine the maximum amount that you can afford. If you can afford the mortgage payments in the future, stick to your budget and weather the storm. If you can afford your mortgage payments but cannot make up the late payments or still cannot afford the mortgage payments in full, then;
7. Contact the lender to discuss the modification: Contact the lender now to discuss modification options. This can include forbearance where you agree to make late payments due over time, deferring previous payments due to the end of the loan (thereby updating them) or a genuine modification of the terms of the loan including repayment, rate reduction and/or increase in term. Have all income checking and budget information ready. Prepare a plan for what you did to reduce and eliminate expenses or increase income. Show the lender that you have done your homework. Try to meet face to face if possible. If you are not satisfied, contact an attorney to assist in negotiations.