I just finished an article on CNBC.com (http://www.cnbc.com/id/29595747) and it was No Job? Can't Refinance? How to Talk to Your Bank. I felt that it was very good however there are a few other options it didn't go over. As a Realtor i feel that everyone should know as many options as possible just in case you find yourself in this situation.
First Things First
This is a very common problem now in America. People are losing their jobs and with no income it would be very difficult to refinance. Although if this happens you are in a bad situation but all hope is not lost. The first thing you should do if you lose your job and know you are going to have trouble paying is Call your lender. As stated in the article above, find who is servicing your loan. If they can't help you, then ask who is the owner of your loan, they will know this information, and you can deal directly with them. The first person you need to ask for is the someone in the loss mitigation department, they are the only people who are trained to say something other than we need our money!
Loss Mitigation
These people are trained to assist you in these situations. The bank really doesn't want to foreclose on your. They will make a lot more money if you can pay your mortgage and it cost them a lot of money to actually go through the foreclosure proceedings. So explain your situation to them. Consider if you can pay anything, if not you may want to write them a letter of forbearance or postponement of payment letter. Although, this isn't guaranteed if you back up your letter with documentation of unemployment or income loss of you or your spouse your bank my grant you the forbearance until you can get back on your feet. However, you interest will keep accruing. If you can pay something you have several other options. One of these options is Loan Modification.
Loan Modification
This is where the lender actually renegotiates the terms of the mortgage. It is always up the the lender on what they can/will do but many times they are willing to work with you instead of just foreclosing. The government is actually offering financial incentives to lenders for loan modifications as a part of the bail out plan, but it's up to the individual lenders to take advantage of this. If this option doesn't work ask you lender about a short-sale.
Short Sale
Now i know the goal is to keep the home but if you think losing it is inevitable the best option is trying to sell it by negotiating a short sell with the lender. This is actually selling your home for less than what you owe. If the lender agrees and you continue to make your payments until it closes you will not get any money out of the deal but you will save your credit, which will be a very important factor in your lease amount, getting a new job, and purchasing a new home or car once you get your new job. First talk to the bank and see if they are will to participate in a short sale. If they say yes, they wont tell you how big of a loss they will take, but some will give you an idea of what to try to sell it for. Get a Realtor who is familiar with short sales and put your home on the market. Have your Realtor fax in the listing paperwork to the lender, the lender should tell you their fax number and what information they need. Once an offer comes in you and your Realtor will need to send it to the lender for review. You don't actually play a role in negotiating since the lender is actually taking a loss and you are not getting any proceeds. If accepted you Realtor will take it to closing and you will need to be there to sign just like a normal transaction. If you lender will not accept a short sale or if your home isn't selling you may want to check into a deed in lieu.
Deed in Lieu
This is actually when you deed your home over to the lender and walk away. If the lender agrees to this they will allow you to walk away from the property owing nothing and saving your credit. This is only a last resort but is much better than being foreclosed on. Again your lender has to agree to this and is not likely to do so unless all other options have been exhausted.
Remember when dealing with your lender and the loss mitigation departments take note of who you are speaking with, their title, what was said and keep copy's of any information you send your lender or its servicer. Try to stay away from businesses that offer to help modify a loan for a hefty price, reputable companies many times offer 100% money back guarantees or no payment upfront. Even if a company offers this check them out through the BBB and on line resources and ask for referrals because the last thing you want to do is spend a lot of money and end up worse than you are now!
Chris Lee • RealtySouth • Tuscaloosa Office
205-233-5183 • clee@realtysouth.com • www.chriswlee.com
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