If you are one of the 2.6 million homeowners who have missed two mortgage payments you still have a chance to get current or take action to avoid foreclosure. After missing more payments the alternatives are fewer and the cost is much higher to get caught up or avoid foreclosure.
Falling behind on a mortgage used to be the last thing homeowners did when they ran into financial difficulties. Stop paying on credit cards and other bills but make the mortgage payment was the way it was since the housing boom of the 1950’s. All of that has changed when home prices started falling. Now, it seems like we all know people who have stopped making their house payments, but drive new cars and pay their credit card bills.
Beyond the obvious threat of foreclosure, which can now take more than a year from missed payment to the street, mortgage default can be expensive. Lenders pile on the late fees as well as administrative and legal feels and the borrower’s credit score will suffer. The sooner the borrower deals with the situation, the sooner and better the chances are for a full financial recovery.
Delinquent homeowners who are determined to stay in their home but can’t find a way to catch up should contact their lender to discuss available options. Lenders have the ability to revise the payment plan, modify the loan or even allowing the borrower to move what is currently owned to the end of the payment plan. Taking action early will increase the likelihood the borrower can stay in the home. Some of these alternatives can be found on lenders websites.
In addition to contacting the lender about past due mortgage payments, borrowers should do review of their financial situation by looking at the amount of money brought in each month and compare that to what needs to be spent. During this process determine if the financial difficulty is short or longer term. If the answer is long term the path to economic recovery may not include staying in a home, especially if the current value is less than the mortgage balance. Leaving a home can be a difficult and often emotional decision. Talking to the lender, an advisor or Realtor can be useful in determining if leaving the home is the right decision. If it is, talk to the lender or experienced Realtor about a short sale.
The next step is collect documentation which will be needed by the lender to make changes to the mortgage which may allow the homeowner to remain in the home or for them to approve a sale where the proceeds are taken by the lender to satisfy the loan (short sale). In any case there will be forms to complete and documentation to submit, which includes pay stubs, bank statements and two years of tax returns. If the reason for not making mortgage payments is a medical or a divorce, evidence of those situations will also be needed.
Borrowers should be talking to their lender or advisor during this difficult time. As I stated above, there are currently 2.6 million home owners who have missed their last two mortgage payments. There is help out there but be careful of scammers who want to charge a feel for service. The federal Department of Housing and Urban Development certifies agencies to provide free assistance and has a list of them on their website. Advisors can point out alternatives and help prepare a budget to see if the homeowner cans stay in the house.
The bottom line is taking action sooner than later if you miss a mortgage payment. Those homeowners who “bury their heads” and ignore the situation are likely to have more serious problems and take a much longer period of time to recover than those you face the problem and seek help.
We specialize serving the needs of buyers and sellers of homes in the Roseville and Sacramento area including Sacramento, Placer, El Dorado, Sutter and Yuba counties.