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 many people are dealing with catastrophic 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 still be a period to enact those policies.
From my experience, that takes some time – something many people do not have. Therefore, I feel those struggling should continue to take steps in the interim to prepare 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, therefore we want to avoid it at all costs. Try to maintain 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 unneeded items (through things like Craig’s List, etc.)
5. Negotiate Unsecured Debt Payment Plans: If payments are still too high to afford mortgage payments, negotiate with unsecured creditors on modified payments and immediately stop using credit cards and debt. Again, the desire is to pay back the debt, just on modified terms.
6. Determine Maximum Affordable Mortgage Payment: Once all previous steps have been done, determine the maximum you can afford. If you can afford mortgage the payments going forward, stick to your budget and ride out the storm. If you can afford your mortgage payments but cannot make up past due payments OR still cannot afford full mortgage payments, then;
7. Contact Lender to Discuss Modification: Now contact your lender to discuss modification options. This can include a forbearance where you agree to make up the past due payments over time, a deferral of the past due payments to the end of the loan (thereby bringing it up to date), or a true modification of the loan terms including payment and/or rate reduction and/or term increase.
Have all income verification and budget information ready. Prepare a 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 face-to-face if possible. If not satisfied, contact an attorney to help with negotiations.
