For most of us, losing our home is our worst nightmare. We've seen this past week in newspaper headlines, many instances of an unavoidable natural disaster creating our neighbors' worst nightmare. You may have also seen in another section of the newspaper an increasing number of Notice of Default announcements. Another families' worst nightmare, they are losing their home to foreclosure. Not a natural disaster but a man made one - could these families' nightmares have been prevented?
Very few people purchase a home with the intent to never pay the mortgage. Instead, families find themselves faced with a difficult life circumstance:
- Sudden illness
- Death in the family
- Divorce/loss of second income
- Excessive debt obligations
- Job loss, demotion or lack of promotions
- Inability to pay an adjusting interest rate mortgage
If you find yourself in a situation where you believe you will not have the money to pay your mortgage, pick up the phone and call your lender or the company servicing your mortgage. While many people believe that telling a lender about financial difficulties will only hasten a move to foreclosure, borrowers should remember that lenders do not like to foreclose on mortgages. Taking possession of your house, maintaining it and then attempting to sell it will nearly always be a losing financial proposition for your bank. Therefore, talk with your lender sooner rather than later to try to arrange new repayment terms. Don't ignore their letters out of embarrassment or fear. The key to being able to work things out with a lender is early action.
If you cannot work out a plan with your current lender, call your Realtor®. Your Realtor® may be able to refer you to a local lender who can help. Some elderly borrowers have even found solutions to their mortgage difficulties through reverse mortgages and other creative, but responsible, tools.
Above all, beware of consumer scams often advertised as "We Buy Houses for Cash," or similar slogans that sound too good to be true, because they are.
There are other options available to you when you are having difficulty making your mortgage payments. These include:
Selling Your Home: Ask a Realtor® to give you a Comparable Market Analysis and a plan to sell your home quickly. If you have equity in your home, this may be your very best bet.
Considering a Short Sale: If your home is worth less than you owe on it, your lender may be willing to consider allowing you to sell your home at a loss to the lender. This option has tax implications as well as credit score implications and is a complex process, so ask your Realtor® or other professional for guidance.
Signing a Deed-in-Lieu of Foreclosure: This is essentially giving the deed back to the lender. This option cancels the foreclosure action, but affects credit scores in the same way as a foreclosure. It may give you time to find a new place to live before you are forced out of your home.
Project HOPE NOW is a voluntary alliance of major lenders who have agreed in principle to assist qualified homeowners who are on the verge of default due to resetting adjustable-rate mortgages. The national toll free number is 888-995-HOPE to reach a counselor for advice and further referral.
Remember, the worst thing you can do if you're having trouble making your monthly mortgage payment is to remain silent. Help may be available; you just have to ask for it and avoid the man made foreclosure disaster.