Dealing With Mortgage Delinquency
After my interview on FOXbusiness.com yesterday with Jenna Lee, Connell McShane and Dagen McDowell, it was clear from the e-mails that there are many people dealing with extreme issues in paying their mortgages and, of great concern, many are waiting on government intervention to solve the problem. Although we hope to have answers and helpful solutions tomorrow as to what the government plans to do, there will nevertheless be a period of time to enact those policies. From my experience, that takes some time – something many people do not have. consequently, I feel those struggling should continue to take steps in the interim to prepare so as to alleviate their situation. For those who are in those situations, here are some simple steps to get started. More advice will be forthcoming:
1. Try to Stay Current: A foreclosure is devastating to a person’s credit and future access to credit, consequently we want to avoid at all costs. Try to continue the mortgage current.
2. Establish a Budget: Determine all income and all outgo to understand where money is going;
3. Reduce and Remove Expenses: Reduce those expenses that are necessary as possible (lowered insurance premiums, reduced utility usage and costs, re-assessed real estate taxes, food, clothing and transportation budgets) and remove those that are unnecessary;
4. Add Income or Sell Personal Belongings: If necessary, seek part-time work or supplementary income or sell of un-needed items (by things like Craig’s List, etc.)
5. Negotiate Unsecured Debt Payment Plans: If payments are nevertheless too high to provide mortgage payments, negotiate with unsecured creditors on alternation payments and closest stop using credit cards and debt. Again, the desire is to pay back the debt, just on alternation terms.
6. Determine Maximum Affordable Mortgage Payment: Once all past steps have been done, determine the maximum you can provide. If you can provide mortgage the payments going forward, stick to your budget and ride out the storm. If you can provide your mortgage payments but cannot make up past due payments OR nevertheless cannot provide complete mortgage payments, then;
7. Contact Lender to Discuss alteration: Now contact your lender to discuss alteration options. This can include a forbearance where you agree to make up the past due payments over time, or a deferral of the past due payments to the end of the loan (thereby bringing it up to date) or a true alteration of the loan terms including payment and/or rate reduction and/or term increase. Have all income verification and budget information ready. Prepare plan of what you have done to reduce and remove expenses or increase income. Show the Lender you have done your homework. Try to meet confront-to-confront if possible. If not satisfied, contact attorney to help with negotiations.