Typically - people are told by the servicer to come back when they are two payments behind (not even one) before they want to speak with you.
There are understandable reasons why borrowers who are delinquent on their payments receive more prompt consideration than those who are current. To the degree that servicers are faced with more requests for help than they can handle at one time, they have to set priorities. The number of borrowers in trouble has ballooned over the last year, outstripping the efforts of servicers to expand their capacity to deal with them.
A plausible way to set priorities is in terms of the degree of urgency of the problem. A borrower 60 days behind in his payment is closer to foreclosure, and if he is going to be saved, he needs faster action than a borrower who is current.
So borrowers who are current get placed at the bottom of the list of borrowers requiring special treatment -- if they are even placed on the list at all.
This tendency is reinforced by the fear of free-riders. All borrowers would like to get a better deal on their mortgages, whether they have trouble making their current payments or not. If loans are being modified to help borrowers, some borrowers who are not in financial distress will try to take advantage of the situation by pretending that they are. But potential free-riders may not be willing to become delinquent because that would hurt their credit. By only considering modifications for borrowers who are already delinquent, the servicer reduces the number of potential free-riders.
In addition, the practice of dealing only with borrowers who are delinquent keeps loans in good standing for longer periods. Consider the borrower who loses her job but has savings sufficient to cover the payments for some months. Investors would prefer that the borrower make the payment out of savings for as long as possible, since she might find another job during this period, avoiding the need for any modification of the mortgage.
If I were a borrower with reduced income but with good prospects of recovery, I would make the payment out of savings, avoiding the hit to my credit.
But - if I considered the prospects of recovery to be poor - with the monthly payments way higher than you can afford - I would stop paying and husband my savings.
This moves you up on the servicer's priority list for special treatment. While it also moves up the hit to your credit, that would happen anyway as soon as your savings are exhausted. In this way - at least you have a small pad left - for moving expenses, rent deposits, storage etc. Don't draw yourself down to nothing. It is a judgement call as to when you take the dive into ruining your credit - but you will know the answer to that - when that day comes....
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If you are thinking about buying / purchasing a home in the Chicago Illinois area, you should ensure that you have an agent that is on your side – looking out for your best interests. Feel free to visit the Buyer Broker Chicagoland web site for more information. Or call 847-566-7558 or Toll Free at 866-493-2842 or e-mail us to schedule a complimentary initial consultation – where we can determine if we can take you as a client.
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