It’s a beautiful day in the neighborhood. However, there may be
storm clouds brewing for some. For the past few years, the
valuation of real estate holdings has increased yearly, often
dramatically. We seemed to forget the fact that real estate is
cyclical. Now we are in a situation where the market is flat, and
in some market sectors, declining.
It’s a beautiful day in the neighborhood. However, there may be storm clouds brewing for some. For the past few years, the valuation of real estate holdings has increased yearly, often dramatically. We seemed to forget the fact that real estate is cyclical. Now we are in a situation where the market is flat, and in some market sectors, declining.
While the value was going up, it made sense to purchase a home with 100% financing with reduced initial monthly payments. But suddenly people are facing no growth in equity and large mortgage payments they are ill prepared to handle. The reports of late mortgage payments and (yikes!) foreclosures are worsening.
What to do, what to do? There are no easy solutions for such a dilemma but there are some suggestions for dealing with it. First things first: Face the fact that there is a problem. Ignoring it will not make it better and it could exacerbate the situation into a total disaster. A common reaction is to give up hope and do nothing. There are steps you may take – make sure you do! The sooner you take action, the more options you have. If you let things spin out of control, you remove options systematically until only foreclosure or bankruptcy is left.
The first thing to do is contact your mortgage company. They will be anxious to work towards a solution with you. No reputable lender truly wants to foreclose on your home. They aren’t in the business of home ownership, and it is expensive for them to take over your house. Be honest about your situation. They might refinance the debt or arrange a modified repayment with an adjusted interest late or extended term of the loan.
You can find the mortgage contact information on your billing statement, in your payment coupon book, or on the Internet. Make sure you have all the pertinent information regarding your loan before you contact them.
Don’t skip a mortgage payment in order to pay for non-essentials. There is no single factor more detrimental to your credit than the dread mortgage late. Newspapers, entertainment and dining out, cable, newspapers, lattes at Starbucks, health club memberships might all have to go by the wayside. This is not the time to re-do the dining room! Do alert your credit card and utility companies. Some have special programs for persons in financial crisis.
Missing a mortgage payment may be the act that keeps you from saving your home. Not only does your credit rating suffer an immediate hit, it also decreases the amount of money you may borrow and the number of lenders willing to lend to you. Whoa, doggies!
If you continue to miss payments, the mortgage company could call your loan. When this occurs a monthly payment will not slow the tide. Instead, they could ask for the entire amount of the loan or an accelerated payment schedule.
It is tempting, when lots of creditors are calling, to pay the little bills and let the big, ugly mortgage payment go. Why not make the other 20 companies happy? The answer is this strategy will certainly dissipate the capital you need to save your home.
Don’t let fear or embarrassment stop you from asking for help from a parent, sibling or close friend. Some people don’t want anyone to know they are in trouble. Believe me, they’ll know when a foreclosure notice is printed in the paper or you have to move out of your house. You might be surprised by the level of understanding and caring you experience.
You also should be aware that scam artists abound. Remember we just talked about predatory lenders? You should also be wary of pre-approved loan offers and phony counseling agencies. It’s easy to get sucked in when vulnerable and desperate. Having said that, you do still have resources. Check the US Department of Housing and Urban Development (www.hud.gov) for information. You also should never sign anything to do with your house without talking to your mortgage company or a lawyer.
How depressing is all this? Very. But it’s important to keep in mind that the worst action is taking no action. If you allow your credit to be ruined, you may not be able to rent a house. And some prospective employers check credit ratings before hiring. What could be worse than losing your home? How about not being able to move into a rental or get a job?
If you’re in this situation, make that phone call to the mortgage company TODAY. If you suspect a loved one faces this challenge, cut out this column and send it along.
Lastly, remember that this, too, shall pass. Life is a journey, not a destination. In the long run, what you have is not important, but how you lived is. It’s not about the cars and the cash, it’s about the connections to other people. For a little inspiration on this subject go to http://www.thedashmovie.com.
Have a great day, it’s a good life. And be kind to your Realtor!
