This can be a very stressful place to be. However, if you find yourself in a situation where you are behind on mortgage payments you must treat the situation with urgency. You must not let fear and anxiety cause you to do nothing. You may have options if you act quickly.
Below are a few steps you can take however your circumstances may be different.
Foreclosure proceedings are most likely to be initiated by the lender when the mortgage is 4-6months behind. That being said, the lender has the right to start the process with even one month past due. So even if you are just one payment behind, the situation should be treated with urgency.
You will know the lender has started the foreclosure process when you are served with a 30day letter stating the mortgage must be brought current or the foreclosure process will begin.
The lender may also print an alert in the local newspaper stating hat foreclosure proceedings will begin on the property. I mention this here because it catches people off-guard. Many times clients believe these are private matters so they will be handled discretely but that’s not always the case. This can be a little embarrassing if you’re not prepared for it.
In part because of this, it’s important to start communication with the lender right away.
Call your mortgage lender and ask to speak with your leader’s “Real Estate Owned Loss Mitigation Department”.
In speaking with them ask them about your options and “how they are working with people in similar situations.” You are not the only person or family in this situation because things in life happen to everyone. The bank is only trying to protect it's asset/investments, it’s not personal.
After contacting the loan mitigation department they may suggest the following options:
If you owe more on the home than its current market value the lender may offer:
If you do a short sale it’s important that the lender agrees to a short sale without recourse. This is because the lender could come after you for the difference between the proceeds from the sale and the amount owed on the mortgage. You do not want to face a lawsuit right after getting through this mortgage ordeal.
If you are able to do a short sale, the difference can be 1099’ed as income. If this happens you will be expected to pay taxes on those dollars in the coming tax season and it will be taxed as earned income. This is something that catches a lot of people by surprise. Again you want to be careful with this because you do not want to end up owing money to the IRS. Owing the IRS money is almost as bad as it gets. It can be quite serious. They can garnish wages, etc…
The important thing is that you get in contact with your lender. If you are behind on payments, they know. It’s not like just because they haven’t contacted you yet you can just ignore it. As it is with most issues in life, a small problem left to fester goes into a bigger problem.
If you are still in doubt about what your options or what your next move should be and believe you could benefit from reviewing your situation with a financial coach prior to contacting your lender you can get started below.
Click here to schedule a 15-minute call with a financial coach. The 15min call is free.