Mortgage Help – Should You Avoid Payments?

If you feel yourself teetering on the edge of not being able to make your house payments, then you might feel like giving up and letting the inevitable happen – foreclosure.

But there might be some help for you if you are not already in default.  Consider that banks and mortgage companies have changed their philosophy on helping those who are having difficulties.  The old way was to wait until the homeowner defaulted until they offered help.  Now that has changed.  They are in more of a preventive treatment mode.

So, the answer is that you should not avoid payments in order to make your situation look worse than it is to obtain help. 

Do everything that you can to remain current, however, contact your mortgage holder right away should you have the first indication that you are going to have trouble making your payments.  You do not have to be behind, just be able to show that you are struggling.

There is also this:  a missed payment of more than thirty days will adversely affect your credit score.  So now not only are you in jeopardy of losing your home, your credit will begin a downward spiral as well.

Another point to consider is that even though you avoid making the payments, you will still owe the money.  The terms of the mortgage make it such that you have to one way or the other make your payments in order to stay in the house.  A re-finance will take into consideration the complete amount of outstanding principle on the house.
An assistance program will likely get you a lower payment, but the other side is that you will be starting over with your payments and your mortgage.

Also, missed payments may make you ineligible for assistance from the new federal government’s Making Homes Affordable plan.  This plan is there for those who are having trouble making their payments.  There are two options.  The first is a loan modification program and the second is a refinance plan.  The loan modification program is available for those who have missed one or more payments but that is not a requirement to get into the program.

The key terminology is “risk of default.”  If you are at that point because your variable rate has reset or you have lost a significant source of income or other hardship, then you would be considered eligible.

The refinance program, on the other hand, is there for those who have not been late over 30 days for at least 12 months.  This means that if you avoid payments, you are already not eligible for this plan.

Call early.  As mentioned before, do not delay in contacting your mortgage holder to let them know of problems as they arise in making your payments.  You will find a receptive ear from those who are interested in helping you.  Also, they might have some programs of their own, in house, in which they can assist you in making your payments.  This is beneficial not only for you, but them as well, because a foreclosure costs them thousands of dollars and they would rather spend time and effort to keep you in your mortgage than to allow you to default.

Be prepared to give information and specifics.  In order to get into any kind of assistance program, whether it is the federal government plan or an in-house program, be prepared to supply information and verification on your hardship details.  This will require some digging and verification processes not unlike those that were undertaken when you purchased the house.

Begin to address your situation as soon as possible.  You will be surprised at the amount of help available that can help you stay in your house for many years to come.

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This entry was posted on Friday, April 17th, 2009 at 6:57 pm and is filed under Credit Card Use, Credit Score, Financial Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.