Wednesday, March 25, 2020

Don't lose your home to foreclosure during the Coronavirus crisis.

by Rod Williams - I am retired now but spend about the last thirty years working for a HUD-approved non-profit housing counseling agency. Up until 2007 I worked helping low-income people become homeowners. After the 2007 housing crisis hit and up until I retired I worked mostly in mortgage-default, helping people avoid losing their home. Unfortunately, a lot of people have poor money management skills, to put it mildly. To be less generous, I would say a lot of people are irresponsible. I see reports that say 70% of Americans live paycheck to paycheck. That does not generate sympathy from me. They shouldn't. It is irresponsible to not have some savings. I know bad things can happen to good people and there are some people living on the edge who can't help it. However, for the majority of people who are financially living on the edge, they never learned discipline and delayed gratification. That being said however, I don't want them to lose their home, because they lost their job. With the closing of bars and restaurants, a lot of people already find themselves unemployed. With the further lockdown, more people are losing their job. The longer this crisis lingers, the more people will lose their job. A lot of people, when they lose their job will lose their house. A lot of people lose their home because they do the wrong things. If one has some savings, one has a better chance to keep one's home than if one does not, but the savings only delays the foreclosure unless one acts wisely. With savings are not having savings, there are steps to increase the likelihood that you will avoid foreclosure. Your solution for avoiding foreclosure and keeping your home can vary depending on several factors. Here are some of them: Who actually owns your mortgage and what policy for foreclosure avoidance to they have in place. The company you pay your mortgage payment to is most often a servicer of the mortgage and their options are limited by the entity that insures your mortgage or owns your mortgage. How is your home titled? If you are married is the mortgage in both names? If you once owned a home jointly with a spouse and are now divorced and were awarded the home through divorce, did you ever have the ex-spouse's name removed from the mortgage and the title? When you lost your job, did you just quit because the company was reducing staff or closing their doors or were you laid-off? Your housing ratio, which is the percentage your gross income that it takes to pay the house payment, and your debt ratio, which is the percentage of your gross income it takes to pay all debt, are factors. Before the crisis did you pay your mortgage on time? It can be complicated. I am listing some general guidelines of what to do if you lose your job and own a home and don't want to lose it. This are general. Other recommended actions would depend on ones specific variables. Immediately get on a crisis budget. Cut all unnecessary expenses. Prioritize. If you have two car payments and a house payment, it is probably better to lose a car than a house. As a housing counselor, I have seen people lose their home who could have saved their home if they would have tightened their belt and prioritized their spending. If you have not applied for unemployment, do it! If the unemployment office says you must have a separation letter from your employer, get it. Communicate with your mortgage company. Don't sent partial payments. Some people think paying half a mortgage payment or whatever they can afford shows good faith and helps them with their mortgage company. It doesn't. If you are not making payments do not let the money you could have paid toward a mortgage payment just get adsorbed in other spending. Save it, so when you do get a workout offer, you have some money to pay toward your mortgage. Don't think a "forbearance" means you can just skip some payments. A forbearance is a temporary plan to skip payment for a while but at the end of the period, the accumulated skipped payment must be paid or a plan put in place to catch them up. See a HUD-approved housing counselor. A counselor can evaluate your situation, develop an action plan for dealing with the crisis and advocate on your behalf. Don't try to do this alone. Be aware of scams. If someone ask you for money to help you avoid foreclosure, it is probably a scam. Don't move out of your home. Some people panic and move. If you are living in your home, you are more likely to be eligible for a workout plan or assistance than if you have abandoned your home. If this crisis continues, there will probably be more programs to help people avoid foreclosure as there were when the housing crisis of 2007 hit. Don't count on it but don't do stupid things that would disqualify you from taking advantage of whatever program may be offered. Taking on more debt is one of the things people do in a crisis that is the wrong thing to do and may disqualify them from whatever workout solution or assistance for which they would otherwise be eligible. Don't panic. Don't bury your head in the sand and just assume it will all work out. Be proactive. I wish all who are facing this crisis, the best. Here are some important links: HUD Approved Housing Counseling Agencies National Community Reinvestment Coalition.

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