Preparing for the Loss of Your Home

You're behind on payments.  In danger of foreclosure.  You know it's a matter of time........

First question - Think about the payments that you should have been making - Have you put that money back into savings or have you spent it?

If you have spent it - perhaps you need to rethink your priorities - It will be to your advantage to have cash to take to the mortgage company to help save your home!

You've probably heard the saying that banks are out to foreclose on your home.  BULLSHIT!  It costs the bank more to foreclose on a home than it does for you to stay in it.

As s former default mortgage underwriter and a former manager of underwriter's here are a few pieces of advice that will help you:

• If you are behind on your mortgage, call you mortgage holder.  See what options they have to help.
• Propose a plan  on how you are going to pay for your mortgage if the mortgage holder approves a workout plan.
• Make sure you return the requested documents as soon as they are asked for.  This will include:  paystubs or p&l if self employed, tax returns (2 years personal and business if self employed), bank statements (the number of months vary with each entity, all legal forms that were sent to you by your mortgage holder (the government requires that they have them).
• Do not pay others to speak for you.  Believe me, mortgage companies do not give them more credence than the homeowner.
• Keep in mind, government programs such as HAMP have very narrow margins in which to qualify.   Most mortgage holders have proprietary programs that they can offer, which have broader guidelines than the government programs.

There is a possibility that you may be responsible for additional taxes if your mortgage holder  forgives part of your mortgage.  You will want to check with a tax attorney or CPA to make sure what you may be responsible for.

If your home if foreclosed upon, you will need to start over.  Do not vandalize the property, in addition to any forgiveness of debt, you could possibly be responsible for criminal charges (Keep in mind that this could make it more difficult for you to get a job, if that is the reason for your default). 

Check with your mortgage holder to see if they have a cash for keys program.  This is where you mortgage holder will give you a minimal amount of cash to move out of your home by a specified date and you have to agree not to damage the property and leave on time.

There is also a lot of talk about property values and homeowners that are upside down on their mortgages.  The reality is  - markets move up and down all the time.  Right now, the real estate market is down.  However, when it goes back up, no one will be complaining then.  My question - and one for you to think about - When the market does recover - should the banks be able to come back and claim the money they lost since the value of the property has risen??  Also, do you really think you will see people getting cash out again on loans?  Probably not.