Are you facing foreclosure and unemployment? And more importantly has your emergency funds run out? Once this bumper savings was prescribed to be three to six months, now a more serious recommendation is eight to twelve, due to the difficulty replacing lost income. Apparently experts are making the recommendation that before your household is in default, contact the lenders as soon as you see a problem on the horizon. Either call before the savings run out or if you have none immediately once your income is reduced due to a job loss. A good source of information is the National Foundation for Credit Counseling, a non-profit national public network.
They may be able to advise you on the tough decisions you may be forced to make. There are additional programs for today’s homeowners offered by loan servicers and some government agencies. For example the department of Housing and Urban Development offers a website for foreclosure avoidance counseling. One troubling trend reported by the Mortgage Bankers Association is that although the numbers of the riskier sub-prime lending loans is falling the volume of the more stable fixed rate loans heading into trouble waters is on the rise.
Due to this trend some of the largest mortgage holders in the country are offering similar counseling services, both Chase Home Finance, and CitiMortgage. Again, early communication and requests for help are encouraged by both companies. A government modification plan known as the Home Affordable Modification Program has had some success with reducing the mortgage payment of some homebuyers based on a debt to income ratio. A criticism or hindrance for some is that there has to be at least one income or bread-winner in the home. For families where only one person was a wage earner and lost a job, then the banks probably won’t work with this mortgage.
However, the greatest benefit may be that if you are in imminent danger of foreclosure, say with zero savings, and a lower income than you had prior to a job loss or downsizing, then you may qualify. One severe warning issued by experts is to be very careful when solicited by companies who claim that they can save your home, especially when a fee is requested on the front end. If you’re experiencing financial hardship, you want to be very wary of the unscrupulous who would attempt to steal what little money you do have. Lastly, one option for many is to seek the short-sale and thereby reducing overhead by downsizing, especially if your home would be attractive to the first time homebuyer seeking the $8,000 tax credit.