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Home >> Lending >> Home Mortgage
Tips to Weather a Mortgage Crisis
If you are having trouble paying your mortgage, you are not alone. In times of crisis, after an initial panic, we focus on what everyone should be doing to avoid a catastrophe. Sometimes, however, survival is about what we shouldn't do, and below I've listed five common mistakes borrowers make that often keep them in the throes of a crisis. Avoid the mistakes, and you'll not only head off the crisis but stay in control of the situation.
Don't forget to make a record of every transaction.
No matter how busy or stressed you are, if you talk to the bank, make a note of it in a computer document or a notebook. Get the representatives name, especially if you are dealing with a large bank where you may not speak to the same person again. Summarize the conversation, and write down the agreed upon terms, and of course, any pertinent dates. In the future, not only will you remember what was agreed upon, but if a problem arises, you can point to a specific representative, date, and agreement.
Don't promise to pay more than you can afford.
When your lender calls, avoid the temptation to offer a payment you can't afford. The bank is likely to ask you if you can make a payment by a certain date, or if you can pay a certain percentage of your delinquent amount. If you can, great, but if not, avoid telling the bank what you think they want to hear. If you promise to make a payment, and then fail to follow through, you will lose credibility with the bank. This may affect their decisions when trying to help you avoid foreclosure.
Don't Forget to ask for Help
No one likes to admit that they are having trouble paying their bills, but that shouldn't stop you from asking for help, especially where it means you may be able to keep your house. Certain charities, like United Way, offer credit and bank counseling at a discount price. Probably the best alternative is to look for counselors via the Department of Housing and Urban Development. Check out http://www.hud.gov/offices/hsg/sfh/hcc /hcs.cfm or call 1-800-569-4287 for a counselor in your area. Lenders strongly encourage people to seek out this type of counseling. No matter who you choose, however, just make sure their fees are reasonable.
Don't take extreme steps before consulting with a counselor and your bank.
Avoid taking extreme steps, like cashing in your 401K. You also maybe tempted to simply walk away from your house, but neither of these rather extreme options is probably best. Nothing good can come from abandoning your home. You will lose the equity, and in this financial climate, the bank will probably take a loss on the sale, which means you may still be on the hook for thousands of dollars. Likewise emptying your 401K right now is probably not a good solution either. The money will only temporarily fix your problems, and chances are, you need a more permanent solution. Not to mention, by emptying out your retirement account early, the penalties and taxes will take much of the money you've worked hard to save. Rather, speak to your bank about alternatives to foreclosure and work out a plan that will salvage your future as well as your present.
Published on BankingQuestions.com 10/14/08
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