The current real estate market is an utter mess, which is leading to a situation where many borrowers are in financial trouble. This brings us to the secret to dealing with banks when you are having mortgage problems.
Foreclosure. It is an ugly word. It used to be reserved for people that ran into major financial difficulties, which occurred fairly rarely. Unfortunately, that is no longer the case. Millions have or are about to be forced into foreclosure in the current real estate market.
The reason is a combination of a variety of factors including price, valuations, resetting interest rates on loans and so on. We aren’t so much interested in what is causing the problem in this article as we are interested in what to do if you face this situation. Life can get very stressful when the lender starts calling, so what can you do?
The first thing to realize is your mortgage lender is in the business of lending money. It is not in the business of owning homes. Regardless of what you’ve heard, your bank does not want to foreclose on you. They don’t want to own the property. They don’t want a bad loan on their books. They just want to sit back and collect payments. Understanding this is the key to dealing with your potential foreclosure situation.
When confronted with a potential foreclosure, most people panic and freeze up. They can’t see any obvious way out of the problem so they do nothing. This is a huge mistake. The problem is not going to go away. If you get proactive, you may be able to find a way out of the problem. In fact, you usually can.
The first step is to contact the lender. Don’t treat them like an enemy. You need to tell them you are having problems. If you’ve missed payments, the lender already understands this. Discuss the possibility of going with a forbearance of payments for three to six months or a reduced payment schedule for a few years. The market is going to bounce back at some point, so you can try to ride it out. Alternatively, you can try to sell the home during the period you are granted relief.
What if the bank is unwilling to give you a break? Well, ask for approval to do a short sale. A short sale is simply the sale of the home for a price that is lower than what you owe on the home. The bank will usually agree to this because it receives a majority of its funds back and doesn’t have to deal with the cost and aggravation of foreclosure.
If you are facing foreclosure, do not stick your head in the sand. Get proactive and deal with the problem. Lenders do not want to own homes, so you have some leverage. Get creative and you’ll be able to get out from under the burden of your mortgage loan.
Raynor James writes about issues surrounding mortgage loans for FSBOAmerica.org where you can list your land for sale by owner for free for 1 month.