Having trouble making your mortgage payments? Not enough equity in your home to sell and pay off your mortgage? It can be overwhelming… and even more so when you have always paid your bills on time and feel so helpless because of factors outside your control.
You are not alone. Although the Minnesota foreclosure rate dropped by 12% from 2008 to 2009, it is still 200% above the pre-2005 average, with just over 23,000 foreclosures in 2009.
In spite of the decline in foreclosures, there was no decline in the the number of homeowners who fell behind on their payments, perhaps at least partly due to the Minnesota legislature. In June 2009 the foreclosure statutes were modified, allowing homeowners to postpone a forced sale date for the first time in Minnesota history.
Some of the most common reasons for mortgage distress are…
- Job loss
- Business failure
- Mortgage payment increase or adjustment
- Divorce or death of a spouse
- Reduced income
- Mortgage fraud
- Predatory lending
If you are a distressed homeowner, you have some options…
If you are current on your mortgage payments and your mortgage balance is 80-125% the current value of your home, you may be able to reduce your monthly payments by refinancing at today's low interest rates in a fixed-rate mortgage as part of the Making Home Affordable initiative launched in 2009. For more information, visit www.MakingHomeAffordable.gov.
SELL AND BRING CASH TO CLOSING
Although many homeowners do not have the cash needed to cure deficiencies at closing, some may liquidate other assets to do so, thereby avoiding the credit damage that can be caused by a short sale or foreclosure. Be sure to consult with finance and tax professionals.
Lenders are in the business of loaning money, not owning property. They don't really want to take over ownership of your home and will often work with homeowners to help keep them in their homes. Some options include…
- Forbearance – If you expect to receive some money… a tax refund, a bonus, a new job… lenders may let you make a partial payment or skip payments if you have a reasonable plan for reinstatement (making a payment to cover all your late payments)
- Repayment plan – if you can't afford reinstatement but can afford to start additional monthly payments, your lender may let you pay an additional amount each month until you catch up
- Loan modification – your lender may agree to amend your mortgage to help you avoid foreclosure in ways such as…
- Adding all the missed payments to the loan amount and increasing the monthly payment to cover the larger loan
- Giving you more years to pay off the loan, lowering the interest rate, and/or forgiving part of the loan to lower you monthly payment
- Switching from an adjustable-rate mortgage to a fixed rate mortgage so there are no increases in your monthly payment
- Including tax and insurance payments with your monthly mortgage payment to avoid big lump sum bills
- Short sale – lender agrees to accept less than the total amount due on the mortgage at time of sale… click here for more info
- Deed in lieu of foreclosure – the borrower agrees to sign over the property to the lender in lieu of foreclosure
- Postpone foreclosure sale – gives you five more months to bring your mortgage current and reduces redemption period to five weeks… click here for more info on this MN state law
- Do nothing or walk away - homeowners who walk away simply because they are unhappy that their property's value is less than what they paid or owe may find there are other financial consequences, contact an attorney for advice
Here are links to some resources…
- Avoiding Foreclosure - info from the US Department of Housing and Urban Development
- Hope Now – find a HUD certified counselor in your area
- Making Home Affordable– FAQ about government homeowner programs, including the new HAFA program which allows $1,500 for short sale homeowners to help with relocation expenses