After my interview on FOXbusiness.com yesterday with Jenna Lee, Connell McShane and Dagen McDowell, it’s clear from the emails that there are a lot of people dealing with catastrophic problems paying their mortgages and, much to their dismay, many waiting for government intervention to solve the problem. While we hope there will be useful answers and solutions tomorrow about what the government will do, there will still be a period of time for enacting the policy. From my experience, it takes time – something that not many people have. Therefore, I feel those who are struggling should continue to take temporary measures to prepare themselves to alleviate their situation. For those in the situation, here are a few simple steps to get started. More suggestions to come:
1. Try to Stay Up-to-date: A foreclosure destroys one’s credit and future access to credit, therefore we want to avoid it at all costs. Try to maintain a current mortgage.
2. Set a Budget: Determine all income and all expenses to understand where the money is going;
3. Reduce and Remove Expenditures: Reduce necessary expenses (lower insurance premiums, reduce usage and utility costs, reassess real estate taxes, food, clothing and transportation budgets) and eliminate unnecessary ones;
4. Increase Income or Sell Personal Items: If necessary, find a part-time job or extra income or sell things you don’t need (through things like Craig’s List, etc.)
5. Negotiate an Unsecured Debt Payment Plan: If the payments are still too high to pay off the mortgage payments, negotiate with unsecured lenders on modified payments and stop using credit cards and debt immediately. Again, his desire was to repay the debt, only on modified terms.
6. Determine the Maximum Affordable Mortgage Payment: After all the previous steps are done, determine the maximum amount you can afford. If you can afford a forward-paying mortgage, stick to your budget and get out of the storm. If you are able to pay your mortgage payment but are unable to pay off any payments that are past due OR are still unable to pay the full mortgage payment, then;
7. Contact Lenders to Discuss Modifications: Now contact your lender to discuss modification options. This could include forbearance in which you agree to pay off payments that are due from time to time, or deferral of payments that are due until the end of the loan (thus renewing them) or actual modification of the loan terms including repayment and/or rate reduction and /or timeframe increments. Have all revenue verification and budget information ready. Prepare a plan for what you have done to reduce and eliminate expenses or increase income. Show the Lender that you have done your homework. Try to meet face to face if possible. If you are not satisfied, contact a lawyer to help with negotiations.
