PART I: If you are at risk of losing your home in a foreclosure you may think there is nothing you can do and that it is too late. Not so. The tables have turned and the programs to help you and the regulatory pressures on the banks to make sure they have exhausted every effort to help you keep your home are pretty strong. This first part of a two part entry will help give you some basic guidelines of how you might be able to save your home.
As the foreclosure crisis continues to unfold across America we are learning that everyone is not foreclosed on for the same reason. Homeowners who can simply not make their payment are the easiest story to understand. Be it a medical situation, a job loss or other debts that just grew too large. This is the classic story of people losing their homes. They can’t pay and there is no hope or circumstance on the immediate horizon that will change that picture.
However, in the realities of today’s market there are situations that are not so cut and dried.
How about the person who is still working and capable of making a payment – but got bad advice about withholding payments to get a loan modification? How about the person who had just a temporary job loss and is now back to work earning comparable pay? How about the lady who was pushed into a loan she could not afford or understand due to a language barrier and an unscrupulous loan officer?
Two important things to know before you read any further:
- Understand you have to set aside any anger, shame or irrational thoughts about the reduced value of your home or the situation that got you to this point. None of that will get you anywhere and in fact might cause you to make bad decisions.
- Every state has a "foreclosure time line" in other words how many days will it be from your missed payment to foreclosure action being started. Be sure you know what this is. Know where you are in the process at all times.
1) KNOW YOUR BUDGET! Your first step, and the key to this whole process, is to figure out your budget and expenses. What can you truly spend per month on your home? Don’t forget taxes and insurance as you figure this out. Typically it should total no more than 28-30% of your total take home pay. Know this number by HEART – no guessing allowed. Because to win this fight with a bank you are going to have to have real numbers that can be substantiated – and you are going to have to know them well.2) YOUR FIRST CALL: to the bank will be to request a mortgage modification. This is not easy – the bank wants endless paperwork – but you do not need to pay anyone to do this for you. It is not rocket science it is not very much fun - but even if you pay someone else to help you you still have to do this! Usually the list consists of the last two Tax returns, pay stubs, bank statements, mortgage coupons (yes they want copies of their own mortgage coupons!) sometimes home owners associations statements and property tax bills. Then they want an itemized household budget. Be careful with this one. You want to tell the truth and you don’t want to forget anything. The cats’ medicine or the once a year tree-trimming bill just make sure it is all in there. Then there needs to be a well written – 3 paragraphs or so letter – explaining why you are behind on the mortgage and why you think that you can now make a modified payment.
PART II: What to do when the bank says no, what to expect and what to watch out for - coming up in part two
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