When you are facing monetary troubles, the path seems as changing as a wheat field. (Photo by Mateusz Stachowski)
It is human nature – trust me – we all do it.
When we get into trouble we don’t want to face those that are calling us to collect their monies from us. We ignore the phone calls, bury our head in the sand, put our fingers in our ears and sing “I can’t hear you.”
But when it comes to your mortgage, playing that game is the worst possible thing you can do. I know it sounds cliche, but fessing up to your mistakes and talking to the bank could just save your home.
We are sitting here in a rare “perfect storm” of the housing market. Regardless of your financial situation, there may be a program for you to work out something on your home — whether that be a loan modification, short sale, of the worst case foreclosure.
“Lenders are having an immensely diffucult time handling the capacity. They are torn between loan modifications, short sales, foreclosures, and they are finding they can’t do all these things at once and do them well, so we’re seeing a lot of things fallign through the cracks,” said Howard Glaser, a housing-industry consultantant during the Clinton administration.
What does all this mean?
- Loan Modifications: These are temporary adjustments to the mortgage’s terms that make it possible for you to keep your home. A six-month reduction the principle due – which is usually added on to the end of the loan — to cover a short-term job loss, etc.
- Loan Restructuring: These are more permanent than the modifciations, but the goal is the same thing. To create a “win-win” that allows the bank to collect their money while you can keep your home. These are what you saw a lot of the people in adjustable-rate mortgages doing with their banks in an attempt to save their home.
- Short Sale: First there is nothing “short” about a short sale. The “short” comes from the property being sold at a value that isn’t enough to cover the bank’s mortgage. For example, a house with a $200,000 mortgage is now able to be sold for $180,000 and the home’s seller asks the bank to give up that extra $20,000 to remove this debt from their books. Short sales are very long and cumbersome to negotiate, but
However, the biggest thing is communication with your bank — the sooner that you address the problem the better the chances of a “win-win” result and you keeping your home.
