What can I do if I am behind on my mortgage payments or if I cannot afford the payments anymore?
First things first, pick up the phone and reach out to your lien holder. Almost all of the banks and servicers across the country offer workout options for their borrowers to get back on track.
A few options that can help:
1.) Loan modification (HAMP or a servicer “in house” mod) – this is a program where usually your past due interest and payments will be rolled into your loan and the bank will underwrite your financials to determine if your payments are too expensive. If they are, the bank might lower your interest rate, extend the term of your loan, or even write off/defer part of your principal balance
2.) Short Sale (HAFA or a servicer “in house” short sale) – this program allows you to sell your home for less than what it is worth. A lot of banks will report this on your credit as “paid in full” which is much less damaging than a foreclosure. It is important that you hire a qualified realtor (with experience in short sales) to represent you in this transaction. The banks will usually cover 6% commissions for your realtor (and the buyer’s realtor) and closing costs. Also, a lot of banks will offer you cash relocation assistance to help you with your move
3.) Deed-In-Lieu – this program allows you to sign your home back to the bank and will release you from the liability of your lien. This option is not usually viable if you have a 2nd lien or any tax liens. The bank will assume your home and try to sell it as an REO property.
4.) Short Refinance – some banks will allow you to refinance your home through a 3rd party company and payoff your loan for less than what is owed.
The main thing to remember is that most banks do not proactively work with you – they are busy, overloaded, and don’t have the staff to hold your hand through the process. This means you need to be in charge, take control, and be actively involved in resolving your hardship.
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