Americans cannot turn on the television or pick up any magazine or newspaper without hearing more about the mortgage foreclosure crisis. But for homeowners who are behind on their mortgage payments, this is not a pop culture phenomenon, this is their reality. Many are in arrears, falling deeper in debt to the lender every single day and unsure of what solutions exist to help them save their home.
There are more than a handful of things which can be done to try to save the home. Some resolutions exist in bankruptcy, many outside of bankruptcy and all of which require effort, sacrifice, and some knowledge on the part of the homeowner to take proactive steps to avoid foreclosure.
Believe it or not, the bank does not want your house. That being said, they also must work within certain parameters in terms of what options they have to offer to homeowners.
If you are looking to do some type of loss mitigation, such as a repayment plan, loan modification, or forbearance agreement, the best way to work on that is to stay in close communication with your bank and be proactive, proactive, proactive. Attempt to find a contact at the lender whom you can speak with personally and come back to for further guidance and communication. Let the bank know what difficulties you are facing, whether those difficulties are short lived, and what you are looking to accomplish. Be honest with the bank and yourself. If they require you to complete a package of paperwork, do so as quickly and accurately as possible and make follow up phone calls to be sure that the package has been received. If you reach any agreement, be sure that you are provided with all terms of the agreement in writing.
Can you sell the home, whether for the amount owed on the mortgage, or less? If you can only sell for less than what is owed, this is called a short sale, and any short sale must be approved by the lender before you can accept an offer from a purchaser. Here again, stay in constant contact with the lender, and be proactive. You won’t receive any proceeds from the sale, but the bank won’t take your home, and it may even have a lesser effect on your credit rating.
If you are in arrears and have regular income to pay back those arrears, just not all at once, Chapter 13 bankruptcy may be a great option for you. Chapter 13 allows mortgagers to pay back the full arrears on the mortgage over time along with the balance of their creditors, often at a percentage on the dollar. A debtor in bankruptcy is then also protected by the automatic stay. As long as you remain current on your payments to the Chapter 13 trustee and your ongoing mortgage payments, you should come out of the bankruptcy current on your mortgage and alleviated of your unsecured debts. For more detailed guidance and advice, as always, contact an experienced Bankruptcy attorney. And don’t wait! There is nothing more difficult than filing an emergency bankruptcy to stay a foreclosure sale. Speak with a bankruptcy attorney as soon as you are more than a month or two behind on payments.
Is it worth the effort to save the house?
One other item to keep in mind is how much equity or negative equity you have in the home. Though there is often an emotional attachment to the family home, when you owe far more than the house is worth, it may not make sense to bring such a mortgage current, since it may take years to recover any equity. Occasionally, foreclosure is the answer to a mortgage arrears problem. But before becoming another victim of the mortgage foreclosure crisis, be sure to discuss all of your options with a knowledgeable attorney.