The current housing crisis is bringing the topic of foreclosure to the forefront of the national conversation. The housing bubble has burst and many people are finding themselves unable to refinance costly Adjustable Rate Loans or unable to afford their current fixed rate loan. Depending on your circumstances, there are several ways to approach this problem. Dealing with it now can save you a host of problems in the future. Any arrangement made and kept will stay on your record as proof to your lender that you are a good risk regardless of an occasional money problem.
This article will discuss ways to avoid foreclosure by communicating with your lender before you miss a payment or before you make a partial payment. There are options for homeowners who have missed one or more payment, or are entering foreclosure but we will focus on the proactive steps you should take the second you know you are going to be late or you are unable to make your full payment.
Life always seems to hand us scenarios we have not planned for. Whether that is a health problem or the car breaking down, we are not always financially prepared for it. When it comes to your mortgage payment it can be tempting to skip a payment and get caught up on other bills but you are opening up a can of worms when you give in to that temptation. Your mortgage payment needs to be one of your highest priorities. Your home is likely the biggest transaction you will make in your life. Keeping your credit report impressive with on time mortgage payments can save you thousands upon thousands of dollars throughout your lifetime.
One positive for homeowners in this volatile market is that lenders are overrun with foreclosed homes and they certainly do not want to add yours to that bulging list. It is of no benefit to lenders to foreclose on your home. It causes lenders to incur hefty expenses and they lose your monthly interest payment. This puts you in a relatively good situation. You have the opportunity to call them up, be honest and forthright and see what you can accomplish working in partnership with your lender. Jump right in and see what they offer you. At the very least the worse thing they can say is no. This could happen but you still have options, which we will discuss.
You should be able to locate a customer service phone number on your monthly bill or payment book. If you are unsuccessful, try searching online for their contact information. You should expect to talk to your lender multiple times concerning your arrangements. This is completely normal and it is a good thing to have recorded on your account.
The first thing you should remember when calling your lender is to be polite. These people know all about the curve balls life can throw at us. They are homeowners, parents and people too. Tell them what your current situation is. Explain why you need a bit of breathing room. It is all about continuing to appear as a viable risk. If they see that you are calling before you miss a payment they will know that you want to keep your home and that you are handling it before it becomes a problem.
When you call your lender you will want to speak to someone a bit higher up than a customer service agent. It may be difficult to get a loan specialist on the phone but explain your situation to customer service and they should know exactly whom you need to speak with. Once you have someone on the phone you will want to explain your situation. Don’t get too emotional just give the facts and explain why this is a one time thing. Make sure that your phone call is recorded on your account so there is a record of you making arrangements. Be prepared before calling with all your relevant financial information such as your account number, household expenses, paycheck stubs and proof of current financial problem, if possible. This can be in the form of a large medical bill for example.
Some of the options you may be presented with are, for one example, an extension of time to make your payment. They may offer you the chance to take a couple months off from paying and tacking the amount to the back of your loan or letting you skip a month and pay a little extra in the following months. This is called forbearance. Do not assume that you have them in a precarious position because of current events in the housing market and that they have to work with you. They are only obligated to stick to the terms of your original loan. Working with you is good for them and for you but it is still a nice thing to allow you some options until you get back on your feet. Believe me, I am not telling you that they are going to do you any favors but it is good business to keep good customers. Customers who call and handle their issues before they become an unmanageable problem are valuable to any institution.
Your lender may mail you a packet to fill out and return. This information will give the lender a chance to offer you the most valuable assistance. Be honest and include any and all documents requested. This may feel like a big project but you are going to save yourself a world of trouble handling it now. It is vital that you return any requested information quickly so your lender can get started finding a solution to fit your needs.
Your lender may also offer you a chance to modify your loan. If your situation is such that you may have difficulty making your payment for many months, such as sudden unemployment, you may need to look at this option. This could buy you valuable time to get back on your feet or sell your home. If your financial picture has become a bit cloudy due to overwhelming debt you can find a credit counseling service and try to lower some of your payments. They can help you set a budget that includes a larger mortgage payment due to a reset in your ARM.
The Department of Housing and Urban Development has counselors available to assist homeowners in negotiating with their lender. They are experienced with all the options generally made available to homeowners by their lender. If your mortgage company says no or is less than forthcoming with solutions it may be time to call a HUD counselor for help. They can also assist you with calculating a budget to prevent this issue from becoming a problem in the future.
If your situation has changed so that you cannot afford the house at any more try to find a temporary solution with your lender and then think about renting it out until you can sell it (read your loan agreement carefully before doing this, as some loans forbid that you live off the property). If you do not take the steps to handle this problem, you could get yourself into a giant mess that will take years to clean up. Your credit report will take a beating and you will have trouble purchasing another home in the future.
If you have not missed a payment on your mortgage, you are still in a good position. This puts you among the lucky homeowners nowadays. Don’t hesitate to call your lender as soon as you know that your mortgage payment is going to be problem. You will likely be surprised at the level of cooperation that you enjoy with your lender. Many financial institutions are realizing that they have to be a bit flexible due to current events.
As soon as you realize that you are in financial trouble the best thing you can do is to be proactive about it. If you try to squeeze by and send in a partial payment without permission you will hurt your credit and hurt your chances of working with your lender in the future. If everyone approached problems such as these as negotiations, there would be fewer financial problems in the world. Every industry is in place to make money and they would be remiss in letting a valuable customer go because of a temporary financial problem.
Handle this in a professional, businesslike manner, remembering that the goal of the lender is to protect their investment and profit. Keeping this in mind can help you negotiate a workable solution. Remain kind, patient and be open to any alternative. As mentioned earlier, if your going to be late with your payment or can only pay a partial payment and are in good standing with your lender, you are one of the lucky ones.
You can recover from this financial hiccup and maintain your good standing with your lender and on your credit report. The sooner you call and start the process the sooner both you and your lender can breathe easy.