We keep hearing talk about owners who aren’t going to be able to keep their homes following a year after staying at home, resulting in a year’s worth of deferred mortgage payments. Based on how deferments were handled in the past, the projection of mass foreclosures may be off the mark. The trickle-down effect of the stimulus package may help some, but for those for whom foreclosure is imminent, exploring options that grew out of the mortgage meltdown may be helpful.
On Your Side
Keeping owners in their homes is key to stabilizing our economy. Remember, lenders don’t want your home. For them, owning property creates a host of problems; squatters, yard service, general property maintenance, and foreclosure expenses, to name a few. It makes more sense for a lender to cooperate with a distressed homeowner than to proceed to foreclosure.
This cooperation might take several forms:
- The lender can reset the mortgage, meaning that they can re-start the payment period and add missed payments to the end.
- They could re-finance the entire mortgage, including the missed payments, which basically accomplishes the same thing.
- I’ve even seen lenders forgive payments for a homeowner who stays current for a period of time and demonstrates the ability to pay moving forward.
- If you are renegotiating your loan or asking for a forbearance, be realistic. While some adjustments can be made, don’t expect your payment to be cut in half.
Going forward, I suspect lenders will be required to exhaust repayment options prior to foreclosure. Remember, any time you miss a payment, the lender will send a “notice of default.” They must do this to protect their financial interest. Forbearances are short-term. Lenders might reduce interest rates or adjust payoffs, but if your situation is not likely to improve quickly, then it’s probably best to explore alternatives with your REALTOR®.
Talk to the lender early and often, and should all that fail, keep in mind that during COVID, prices have increased significantly. When keeping the home seems hopeless, contact your REALTOR® to find out what your home is worth. It makes more sense for a distressed homeowner to sell than to allow the lender to foreclosure. And consider for owner-occupants, profit up to $500,000 (for a couple) will be tax-free.
- If foreclosure happens, you may need to rent for a bit. But after a few years, you can likely jump back into homeownership. Here are a few more tips that might help if you find yourself hopelessly behind.
- Stay in the home until the right of possession has ended, which, in Hawai`i, normally means a judicial foreclosure.
- Be sure to answer any summons, and if you are challenging the foreclosure or working on a repayment plan, this is the time to consider available resources…
- Which brings me to a final piece of “Mom” advice; REALTORS® can be that resource. Trust me; there’s nothing fun about showing a foreclosed home. They’re usually dirty, smelly, buggy, and if you’ve been around as long as me, you remember them in better days. LOL!!! 🙂