Are you unable to make the payments on your home loan? Are you confused about what to do? Are emotions clouding your judgment and making it difficult for you to talk about it to your mortgage company? If so, you are not alone. Nationwide, about one in six families is behind on their mortgage. I am not an expert in mortgage foreclosure. I am writing this post for the purpose of trying to link you into resources that can help.
Facing potential loss of your home may also be a very emotional experience. It may, simply, be difficult to face this issue. However, it’s important not to ignore the problem, because it will not go away. If foreclosure proceedings are brought against you, the wheels have been set in motion to evict you from your home. You must develop a “Plan B“!
What is a reasonable Plan B for a person who cannot make their mortgage payments? There are some steps you should take immediately. First, figure out realistically whether it will ever be possible for you to meet the obligation, under any circumstances. A credit counseling agency may be able to assist you with this assessment. (Click HERE for link to HUD approved programs in your state. If you are in South Carolina, the link is HERE.)
There are federal programs for distressed homeowners (see links, HERE). While helpful for some, these are less useful for others.
There are also some facts which may be important to your lender: Can you show that you would be able to make payments if (1) the debt were restructured, (2) if the interest rate were lower, (3) if penalties were forgiven, (4) if any missed payments were tacked onto the end of the loan or spaced out over a period of time? Also, can you prove to the bank that you will have ability to meet the restructured terms? Can you produce income statements and a budget that shows you could do it? There are many other options, as well, which are more detailed and which are beyond the scope of this article.
The worst thing you can do is to ignore this problem! Your first step is to call either your lender or a credit counseling agency who can speak with your lender on your behalf. Put your best foot forward, and give it a shot.
A lawyer recently told me, “By the time these cases come to mediation, the homeowner is nine or ten months in arrears, and there is just too much money owed. The homeowner can’t come up with the amount of money the bank needs to stop foreclosure.” Do not, do NOT wait nine months to talk to the bank! Do not wait two months. If possible, work things out with the bank so that you put your finger in the dike before you are even late on one payment. Taking preventive measures may save more than your house, it may save your credit report as well.
It may be that talking with the bank seems too hard for you to do on your own. Perhaps it is very emotional, or perhaps confusing. Or perhaps the mortgagee doesn’t seem willing to talk or talks break down. If so, then you may wish to engage an attorney to assist you.
In South Carolina, a good resource to find an attorney who represents parties in foreclosure is through the S.C. Bar Lawyer Referral Service (click HERE). If you don’t have funds to pay for an attorney, you may also try South Carolina Legal Services. (To qualify for help from SCLS, your income cannot be greater than 125% of the federal poverty level.) Additional counseling agencies for South Carolina are also listed HERE.
Both parties often find that a mediator is useful, as well. A mediator is someone who does not represent either party. Rather, they facilitate communication and negotiation. A mediator is particularly helpful in cases where your emotions cloud your judgment or make it difficult for you to communicate your position clearly and positively. A mediator in a foreclosure case will also have specialized training and knowledge of potential options. The mediator will facilitate discussions with the lender, but does not take sides or give legal advice. A mediator will keep with discussions until all avenues have been exhausted.
The mediator’s fee is normally split by the parties, but in foreclosure mediation the fee is often paid by the lender. Some advantages of mediation are discussed in my post HERE. Fundamentally, I view mediation as a way for both parties to make a their first, best-effort attempt to find a resolution that meets the needs of everyone. The presence of a mediator helps facilitate good communication and smooth over misunderstandings, increasing the likelihood of (but not guaranteeing) a good result. Even when the result is not what you had hoped, mediation can often make it a better result than you or the lender would have obtained by way of a judicial foreclosure.
The most important thing is this: You must not just sit there and wait for your house to be foreclosed. Mediation is successful in somewhere between 1/5 (New Jersey) and 3/4 (Philadelphia, Connecticut) of cases. Perhaps this seems like a discouraging statistic. Yet, it’s better than nothing. Doing nothing will result closer to a 100% probability of your being evicted from your home. Moreover, even if you cannot meet the obligation and must give the house back to the bank, there is a possibility that you may qualify for additional avenues that may help save your credit or cushion the financial blow of having to move. (See resources HERE.) These options are called a “graceful exit,” and may be better for both parties than the alternative of a sheriff’s eviction and judicial sale. (For exampale, see article, HERE)
Whether you consult with an attorney, with a mediator, or with both, don’t wait until you are many months in arrears to do so. Waiting just makes the problems — and the size of the missed payments — all the bigger. Talking may help prevent foreclosure. Mediation helps the talking. If you need help, call someone today.
Important: This article is for educational use and represents my opinion only. Please understand that this blog is not intended as legal advice for your particular case. Nothing about this blog makes me your lawyer. Nor can I answer your particular legal problems. If you have a legal problem, you need to hire an attorney.