Loan Workout Programs Assist Troubled Homeowners

By Karen Lawson
CMR Columnist

When you bought your home a few years ago, rates were low, and you planned to stay in your home for the foreseeable future. Circumstances have changed. Current interest rates are higher, sales of homes are sluggish, and you've moved out of the area, and are paying for temporary quarters until your home sells. You and your budget are stressed. What can you do?

Work With Your Lender to Find a Solution

If your situation has reached a point where you are struggling to make payments on the home you're selling, it's time to talk with your mortgage lender. Here are a few tips for preparing for that discussion. You will need to be completely honest with yourself and your lender. You will need to demonstrate financial hardship in order to qualify for most workout programs.
  • Calculate your total monthly income. Use pay stubs, bank statements, and any other documents that show your monthly income.
  • Next, (and this can be difficult) assemble a statement of all monthly expenses. Mortgage payments, car payments, credit card bills, student loans, food, gas, household supplies, grooming, medical expenses, gifts, recreation. You must include everything. Be realistic; your lender wont finance $100 haircuts or dining out every night.
  • Now it's time to put on your editor's hat. What expenses can you cut? Which ones can be reduced? Identify these, and total the amount of monthly savings, then recalculate your monthly budget. If you are still "upside down," call your lender and explain your situation.
It's best to be proactive, and attempt debt consolidation or credit counseling, if needed. Your lender may extend a period of forbearance, but eventually, the payments and late charges will have to be paid. Forbearance is most useful when you have a definite date when you'll be able to repay. When you receive an offer on your home from a solid buyer, any past due amounts will likely be paid when the sale is completed, and your mortgage is paid in full.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She assisted in development of loan workout programs that have been used nationwide. She holds a Master's degree in English from the University of Nevada, Reno.

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