Lose your job, keep your home
If you’re faced with a layoff, there are ways to escape foreclosure and stay in your home.
Homeowners meet with bank representatives to renegotiate mortgage payments and discuss ways to save their home from the possibility of foreclosure at a recent event organized by the nonprofit organization Neighborhood Assistance Corporation of America at the Los Angeles Convention Center. © Robyn Beck/AFP/Getty Images
Few words sting like the ones that inform you that you're being laid off — especially today, with jobs so hard to come by. If you're a homeowner, the blow of a job loss can be even worse.
In households with more than one wage earner, halving the monthly income can severely stretch a budget. And in households where there's one breadwinner, having zero income can be devastating. A rainy-day fund helps, but it's important to craft a plan early about how you're going to get through the rough patch.
More people are facing this nightmare today: While the volume of subprime mortgages headed to foreclosure is falling, the volume of prime, fixed-rate mortgages defaulting is on the rise, according to statistics from the Mortgage Bankers Association.
"If you don't have the prescribed three to six months income in the bank (now eight to 12 months due to how long it takes to replace that job), you're really in deep trouble with some troubling decisions to make," said Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling, in an e-mail. The NFCC is a national, nonprofit credit-counseling network.
"We always advise people to pay their living expenses in full (this includes the house payment), followed by any secured debt (usually the car payment), and then the creditors. This will keep a roof over your head, food on the table, utilities paid, medicine in the cabinet, the kids at day care, etc. Once the money runs out, no one beneath that line gets paid. However, this assumes that there's either some savings to fall back on or another income source," she said.
Between programs offered by the government and loan servicers, additional options are available for today's homeowners before they slip into foreclosure — if they speak up and ask for help. Or maybe the best answer is to start over again by cutting your losses and selling your home or pursuing a short sale if you owe more on your mortgage than your home is worth, those in the industry say.
Bing: Search & decide
Whichever road you choose, it's important to contact the lender or servicer as soon as you know you could have a problem on your hands — and before you get behind on your payments. The MBA has a listing of contact information for lenders and servicers, including links to Web sites that give consumers a glimpse of some of the help that is offered. Visit the MBA lender and servicer list.
"A lot of customers call us very late in the process, and it becomes extremely difficult for us to explain everything in one shot and to resolve everything to their satisfaction," said Sanjiv Das, CEO of CitiMortgage. See more on Citi's foreclosure-prevention efforts.
Early communication is also stressed at Chase, said Christine Holevas, a bank spokeswoman. Remember also to be open and honest about your financial situation. You may think you're bettering your chances for help by fudging on income information, for example, but it will in fact slow the process down; when income is verified and is found to be false, you'll have to start over again, she said.
For help, there are counselors who will sit down with you and sort through options and paperwork. Chase, for example, has counselors at 27 homeownership centers throughout the country to assist its borrowers, Holevas said. The U.S. Department of Housing and Urban Development has a list of approved housing counselors, or homeowners can connect with a counselor through the NFCC site.
- Check out Chase.com for a list of homeownership centers
- Visit HUD's foreclosure-avoidance counseling site
- Visit the NFCC's housing counselor locator page
The solution that has gotten some of the most press this year has been the government's Home Affordable Modification Program, which lowers monthly payments for borrowers based on debt-to-income ratios. Borrowers have to successfully complete a three-month trial period before the modification is finalized.
Some homeowners are still confused about who is eligible, said Greg Hebner, president of MOS Group, a loss-mitigation service provider that works with lenders and servicers. Visit the MOS Mortgage Outreach Web site.
For one, the program "requires a hardship, but does not require you to be delinquent," Hebner said. "That is an important consumer misconception — if I'm still making my payments, there is no help for me." See if you're eligible for a government modification.
But what the government does require is some amount of monthly income in the household, said Drew Kessler, director of sales for Rand Mortgage, in New City, N.Y. In a dual-income household, for example, if one person loses his or her job, a modification is a possibility. With one breadwinner, it probably isn't.
"There has to be some viable source of income," Kessler said. "If they lost wages, or found a new job, the banks will work with them."
Kessler's advice: It might be best to accept a job that pays less instead of holding out for one that is best-suited to your salary history, in order to qualify for the adjustment.
A borrower also has to be in danger of imminent default to be eligible, Holevas said.
"They're going to take a look at what your liquid assets are," she said. If a borrower has more than seven months worth of payments in savings, he or she is not yet in imminent danger of falling behind and likely won't be able to modify, she said.
If you do qualify, it's important to submit complete and accurate information in order for the application to move through the process without hiccups, Holevas added. If you don't, "the back and forth tends to really slow things down," she said. Visit the government's checklist on what to know before you call your servicer.
Remember, if you don't qualify for the government's program, many mortgage servicers have their own modification plans, Holevas said. All options can be examined if you start early enough.
"Contact your lender when you think you're going to have a problem," she said, even if you're a couple of months out from not being able to make your payment.
Something has to break soon and it really looks like the break is the backbone of the American Middle class.
Yes, this administration was suposed to help all those who can not afford their mortgage payments through legislation. Now we can forget about that, with a lost majority in the senate, and the republicans voting as a block; our good friend president Obama is never ever going to be able to keep his campaign promises.
The question is: who to vote for? Republicans? will they help in this situation? or keep voting democrat?
I am dissapointed at president Obama. He lost majority in the Senate and the republicans will sabotage him until the end of his presidency. Change will not come, too late he learned the thruth about republicans, and too high is the cost; of course, we are all paying for it
I've read all of the nightmares and have to share that I've been going through the same process for now 7 months with Wells Fargo. Apparently, the same support staff must work for Chase as well as Wells Fargo Bank. I've gone back and forth for months sending repeat documentation over and over and over. I've even received approval and then successfully completed the three-month trial period only to find that they were still missing documentation that they've received multiple times mind you and then was promptly notified that I was cancelled out of the program for not cooperating. Then the next wave of incompetence came in the form of being sent to Wells Fargo Collections as I was paying reduced payments. So they are now trying to collect on the one payment they told me I did not have to make and collecting for the difference in payments that I made during the trial period. Next, I was informed I would have to start the application process all over again in order to re-qualify for the program and despite having all of the documentation on file I would need to resend everything over again. I don't think that I've ever cussed out so many incompetent people in my life than I have over the last six months with Wells Fargo. Now I clearly understand why people just walk away from their homes when faced with this ordeal. I've been lied to repeatedly, told that manager's were not available for escalation, I've sent documentation over and over and over again. Currently, we are now forgetting the modification and trying to catch up on the payments that are in the rears and stay current which is very challenging. Good luck to those....from here in Phoenix, AZ. Lastly, I just want to put out into cyberspace that us consumers will remember where our US Banks left us hanging especially when they've all mostly received billions in tax payer TARP money. I callenge us as consumers to remember what the banks have done to us in order to save themselves in this bad economy.
I am a Wells Fargo mortgage customer. In March 2009, I lost my job to downsizing/economy. I contacted them asked for assistance. I sent them a hardship letter with my unemployment benefits as well as my financial information. I waited for a couple of months and got a letter back stating I needed to make a balloon payment of $7700 by a certain date and by signing this document I agree that they can contact at any time(to me it equaled harassment if they did that) and agree to make the payment. Now why would I ask for help if I had $7700 to pay them in the first place. I had really no source of income except for what I have saved and my unemployment benefits which really is not much. I sat on the document for a while finally after getting calls from Wells. I was told I did not have to sign it if I though it was a bad deal and send a letter back stating why I did not sign it. Not too long ago , I got a letter stating that I was denied on a moratorium and they seemed to give only 4 options which did not include keeping my home. Keep in mine, I have been making my mortgage payments at times not in full.
This article is full of itself and I agree these banks can careless about keeping owners in their homes. They are more worried about greed than extending a break to someone who would probably be dealing with them in the long term; not like I am a deadbeat just unemployed and still looking with no success because employers can play shrinks and decide who is overqualified and who will be bored at the job.
When you know your getting a pay cut, losing your job or anything else..stop paying all bills move out find a place to rent or live with someone..file on everything...its better to have bad ccredit for 7-10 years..then a headache for life?
The article said.........
"Whichever road you choose, it's important to contact the lender or servicer as soon as you know you could have a problem on your hands — and before you get behind on your payments. "
I heard this from allot of sources...and basically it sounds good but is completely wrong. I knew a month ago that my salary was getting cut in half...50 % starting Oct 1 2009. I called my mortgage company and a few credit card companies as soon as I knew I was going to be in trouble paying my bills. I wanted to get in front of this mess and wanted to be upfront about my situation....... THEY ALL TOLD ME THE VERY SAME THING......Sorry, there is nothing we can do until YOU'RE IN TROUBLE AND HAVE MISSED PAYMENTS....CALL US THEN !
I offered to pay 30 cents on the dollar to "settle up" but they said (credit card companies) that they don't do that. I had just had a friend tell me that he settled with his credit cards for 30 cents on the dollar and one of his credit card companies was the same as mine. He was really far behind in his payments THEN they were willing to play ball. I can see why ...after awhile declaring bankruptcy and not paying them anything is not really that bad of an idea...screw em.
This whole system is terribly screwed up and wasteful. Now a new stimulus plan is around the corner...they want to help people buy homes ..not help people hold on to what they have...it's so ass backwards....how does this system ever work. Reminds me of the Army term...SNAFU...Situation normal all f..... up !