Many times when you find yourself behind on your mortgage payments it can be down right scary. You are behind on all your other bills and you just don’t want to deal with any of your creditors. The worst thing you can do at this point is to follow your feelings of fear. Find the strength to contact your mortgage lender, because believe it or not, they do not want to foreclose on your home but they will if you do not contact them. In this post I will offer you several simple steps to take when contacting your lender.
The first thing to recognize before calling is that your lender wants to help. Even if the person you get on the phone when you call is not the friendliest person around, try to be nice. Remember that most people that call into the mortgage representatives are screaming on the phone about all the late fees they have been charged. Always keep in mind that this operator on the phone can help your cause! So you need to try to be courteous and befriend them if you can. Sounds simple but I can’t stress it enough.
The second task you must complete before you contact the lender is to get your paperwork together. Make sure and have recent pay stubs, bank statements and most of all be prepared to explain why you fell behind on your mortgage. Write it down before calling.
Next you need to be aware of what options are available to you. Below is a list of options that every lender is willing to do – depending on your situation. Here are the possibilities:
Repayment Plan: The plan allows the homeowner to repay past due amount over time. With this plan, the owner pays regular mortgage payments plus a small portion of the past due amount until all past due amounts are paid in full.
Loan Modification: A modification of a mortgage puts the past due amounts into the remaining terms of the mortgage. Then the loan is re-amortized and restructured over a new term (typically 30 years) and thereby you are starting over fresh. The homeowner will only be required to pay the attorney’s fees or court costs, if applicable. In English, that means your late payments are put on the end of your loan and you essentially start over. A reasonable down payment will likely be required.
Forbearance: With this option, mortgage payments are suspended or reduced for 3-6 months. After that period of time, other options are explored in order to bring the loan current. Usually this is reserved for home owners with a very serious hardship. TIP: Technically a forbearance is just the temporary suspension or reduction of payments and no “solution” is included. Many times, this term gets tossed around in many different versions – make sure you and your lender are on the same page if you are asking for a forbearance to get a temporary suspension or reduction.
Short Sale: A “short sale” is a sale of the property for less than the total amount owed on the mortgage. If the home owner owes more on their property than it is worth, an investor (we can arrange you with an ethical investor) may be able to convince the mortgage company to accept a short sale. Most lenders would rather have the majority of their money back than the hassle of a foreclosure, legal fees, renovation, and marketing costs associated with the reselling of the property.
Bankruptcy: The homeowner files Chapter 13 bankruptcy which stops the foreclosure proceedings which in turn prevents any other options from being explored. More information has been made available by Jessica at the MortgageFit Lab here and here.
Reinstatement: Reinstatement simply means to cure the default in your mortgage loan by paying the amount of missed payments, plus late charges, costs of collections, etc., which results in a reinstatement of the mortgage loan as if no default had ever occurred.
Deed-in-Lieu: A Deed in Lieu of foreclosure (DIL) is a disposition option in which a mortgagor (home owner) voluntarily deeds the property in exchange for a release from all obligations under the mortgage. A DIL of foreclosure may not be accepted from home owners who can financially make their mortgage payments.
Decide which route sounds best for you. Print this out and have these options with you when you talk to the mortgage company. They are much more likely to work with you if you are already educated on your options. If the mortgage company will not talk to you read the article “The Mortgage Company Won’t Talk to Me”. If at this point you get stuck then you can give us a call.
Ok, now that you have the basic information that you will need, you are ready to contact the lender. Make sure that when you call the lender that you are transferred to the “loss mitigation” department. Many times when you call into a lender they will forward you to the foreclosure department or the collections department. That is not where you want to be. The foreclosure department is usually the liaison with the foreclosure attorney who is going to be foreclosing on your home. The collections department is handling the record of your delinquent account. So make sure once you are transferred that you ask and verify that you have been transferred to the loss mitigation department.
A common misconception is that if you have already done a workout plan with the mortgage company and they will not do another workout for you. That is wrong. I have personally helped people do as many as three workout plans with the same mortgage company.
So don’t be afraid of your lender. With the correct information and an awareness of the options available to you, you should not only contact your lender but inform them of which workout option works best for you.
Best Regards,
Cliff Pape
Home-Buddies