October 27, 2008

What if I can’t make my mortgage payment? (Free credit counseling available + mortgage scams to watch out for)

If you are beginning to worry about making your mortgage payment, check out this MSNBC article for actions you should take either before or after you actually miss a payment. Lenders have what they call Homeowner Retention Departments and they are more willing than ever to work with you to modify your loan to keep you in your home. These modifications are on a case-by-case basis, but some examples include:

  • A freeze in your interest rate if you have an adjustable rate and it is scheduled to increase
  • A reduction in your interest rate even if it is not adjustable
  • A temporary suspension of mortgage payments (say 6 months) along with a plan to make up the missed payments within 1 year
  • Refinancing of your loan (called a cash-out refi) to get some extra cash to help you out for a while – this option will only work if your loan is less than the value of your home and you have that equity to borrow against

It all depends on your specific financial situation, ie. how much equity you have in your home, your credit score and if your financial troubles are temporary or ongoing.

It is certainly worth a call to find out what may be possible and the conversation will not affect your credit rating. If you have already missed a payment or two, your options will be more limited. That is why you want to look into it before you miss a payment. My buddy at Countrywide, Cameron White-Ford, said that less than half of homeowners ever contact their lender before their home goes into foreclosure. It sounds like many people don’t realize that help may be available.

Even if you are gainfully employed and comfortably making your mortgage payments, there is a scam you should watch out for.  This ploy has been around for years, but with so many banks merging and being acquired by other banks or the Feds, I suspect it will increase.  Here’s how it works.

You get a letter in the mail that looks official – like it is from your lender – saying that your loan has been sold and payments should now be sent to (insert scammers PO Box here).  If you get a letter like this, call your current lender and verify that your loan has been sold or is being serviced by a different company before you mail a check to the new address. Mortgage are a matter of public record, so anyone can get the name of our mortgage company and the initial amount of our loan which may fool you into thinking that the change is legit.

There are also scammers that target homeowners who are going into foreclosure. Again this info is public record. They may claim to negotiate with your lender or offer to buy your house and rent it back to you, but really they are just trying to force you into a situation where you will sell them your home on the cheap. For counseling you can trust, call the Hope Now Alliance at 1-888-995-HOPE or NFCC’s Homeowner Crisis Resource Center at 866-557-2227

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