Living paycheck to paycheck is not uncommon for many homeowners. And sometimes, when you find yourself in a bind and you’re struggling to make the next mortgage payment, you may be tempted to try and skip a payment, thinking you can repay it later once you get back on track. But a passive approach to a financial issue—particularly one involving something as impactful as your mortgage—is not advisable. Being proactive and straightforward with your creditors is far more prudent in a personal financial crisis.
The power of honesty
“The first and most important thing I always tell clients concerning delinquent mortgage payments is to contact their lender/servicer, in writing, to advise them of the hardship and inability to make payments,” says Cydney Bulger, attorney with The Bulger Firm in Jacksonville, Florida. While the last thing you may want to do is openly admit your inability to pay your mortgage, being forthright about your situation will serve you far better in the long run.
Don’t wait too long
The longer you wait to make your financial struggle known and the harder you attempt to work the system, the less favorably your personal financial crisis is likely to work out. “The farther the issues go, the less affordable a modified loan can be,” warns Bryant H. Dunivan, Jr., a real estate and consumer protection attorney in Florida. Don’t assume that you have no options; you won’t know if your bank or servicer will work with you unless you ask.
For homeowners who have already missed a mortgage payment, Dunivan recommends making the most of rules restricting dual tracking, by seeking loan assistance as soon as possible. Dual tracking is when a mortgage servicer forecloses on a property while simultaneously considering a loan modification. Created by the Consumer Financial Protection Bureau (CFPB) in 2013, the rule restricting dual tracking prohibits the practice in the 120-day period after a default.
Dunivan explains that this rule has “…allowed for a lot more protecting for homeowners going into, or already in, foreclosure.” Violations of this rule, “… may subject the servicer to damages, and may give a borrower leverage in a foreclosure lawsuit,” he adds.
Pursue all possible options
“There may be some state programs that make mortgage payments for people,” says Dunivan. The Hardest Hit Fund (HHF) was developed in 2010 for homeowners who have truly struggled to make their monthly mortgage payments in an effort to prevent foreclosure and stabilize neighborhoods. Not all states participate in the HHF, but those that do focus on helping two groups of people stay in their homes: unemployed homeowners who are looking for new work, and homeowners who owe more on their mortgage than their home is worth.
But don’t expect miracles
“Calling your bank gets the ball rolling on any potential loan modification option,” says Dunivan. But banks may or may not offer leniency, even if you’re honest about your situation. And if your situation is more serious and your ability to pay back the loan is truly compromised, “it’s a typical handoff system where once you meet certain criteria, you are put into foreclosure and then a series of automated messages are sent out by mail.”
“Now, more than ever (post-2007 housing crash), lenders are willing to work with delinquent homeowners, but if the homeowners fail to advise them of the problem, they don’t know that they need help and assume the worst,” says Bulger. Your failure to act can lead lenders to believe that you don’t care about your financial obligations. If you wait too long to ask for help, you could eventually discover that it’s too late. If foreclosure is inevitable, consider reaching out to an attorney who specializes in helping people through—or, if you have a good case, fighting—the foreclosure process.