many months. Hopefully during that extra time you can solve the underlying problems and avoid
ever having a foreclosure.
If
you have NOT missed a payment yet, but know you are going to,
then the first stepthat you must take is to contact your lender and let them know about your situation. If you
have lost your job have or some other type of hardship going on, then let them know. They can
give you time to help get your life back together, but you must call them as soon as you know that
you are going to miss a payment. The longer you wait, or if you wait until you actually miss your
payment, makes it more difficult to ultimately get the problem solved.
Ask
for forbearance.
This allows you to delay
payments for a short period of time, with theunderstanding that another option will be used afterwards to bring the account current. For example,
if you know that you will have the funds to bring your account current by a specific date because of
a guaranteed sum of money you will be receiving.
Ask
for a repayment plan. This
is where the
lender agrees to add a certain amount of thefirst missed payment onto each of the next subsequent two payments. These plans provide some
breathing room for you if you ONLY have short-term financial problems. Such problems include
a sudden expensive repair or a medical expense that makes it too difficult to pay your mortgage for
one month.
If
you already have missed two or
three payments
and owe a couple thousand dollars inlender legal fees, then the lender of your mortgage may still try to arrange a repayment schedule.
But you likely will have to pay a third to a half of the delinquent amount upfront and then pay off
a portion of the remaining balance each month for a year or more. Also, never ignore the lender's
letters or phone calls. Ignoring the problem will not make it go away. If you are going into a fore-
closure process, then there are other fees and costs involved. Ignoring them only makes for a worse
situation.
to the top
You also
may be eligible for a
loan modification plan
designed for people that can
notafford repayment plans. In a modification, the lender actually adjusts the terms of the loan to make it
affordable. It may lengthen your amortization schedule, lower the interest rate to cut the monthly
payments, or roll the past due amount into the loan and re-amortize the new balance. In the last alterna-
tive, you can pay the additional debt back over time.
Some
companies may be willing
to offer you a "short refinance. With
a refinance, the lenderagrees to forgive some of your debt and refinance the rest into a new loan. This way, the lender still
gets more money than they would by foreclosing on you.
A
Deed in Lieu of foreclosure (DIL)
is an option in which you voluntarily deed your propertyback to the lender in exchange for a release from ALL obligations under the mortgage. Unfortunately,
there is no way to do this without hurting your credit unless you get the mortgage company to report
your mortgage account as paid in full. You may face income tax issues resulting from the lender for-
giving part of the debt (which the IRS likely will treat as income to you). Even though you don't receive
any cash in the transaction, you might be able to get yourself out of the hole and start over again sooner
rather than later.
If
none of these 6
methods work, you can afford
your normal
monthly mortgage payment,BUT you can't afford to make up the delinquent amount and legal fees because your lender offered a
really harsh repayment plan, then you may want to consider filing Chapter 13 bankruptcy. Doing
so temporarily halts the foreclosure process and can force the mortgage lender to accept a more friendly
repayment plan. This is a last resort and will still negatively affect your credit.
