Getting back in the black
The New York
Times
Getting back in the black
More than 2.6 million households are at least 60 days delinquent on their
mortgage payments, according to the nonprofit coalition Hope Now. While those
who are delinquent 60-120 days can make back payments to help them become
current, those who are more than two months behind may need to employ other
means to catch up.
Making sense of the
story
- Beyond the obvious threat of
foreclosure, falling behind on a mortgage can be costly: Lenders
charge late fees as well as legal and administrative costs, and the
borrower’s credit score will suffer. Experts say the sooner a delinquent
borrower deals with the situation, the better the chances are of making a
full economic recovery.
- Borrowers who are determined
to stay in their home but cannot immediately make back payments need to
start by contacting their lender or a credit counselor to discuss
available options. Among them are devising a repayment plan,
modifying the loan, doing a short sale, and adding what is owed back into
the mortgage balance.
- The first step borrowers
should take is to assess their financial situation by looking at the
amount of money brought in each month versus what is spent. Many
credit and housing counselors have worksheets on their websites to help
with this.
- Next, borrowers should
collect pay stubs, documentation on other income, two years’ worth of tax
returns, two months of saving and checking account statements, and
mortgage records. If the borrower has experienced a hardship, such
as a layoff, a divorce, or an illness, they should gather evidence of
that, such as unemployment insurance receipts, medical bills, a copy of a
doctor’s letter to their employer, or a divorce decree.
- Finally, borrowers should
talk to their lender, servicer, or an adviser. The federal
Dept. of Housing and Urban Development certifies counseling agencies that
provide free advice and assistance, and has a list of them on its
website. Counselors can offer alternatives and prepare a budget to
see if the homeowner can afford to stay in the house.
- Before agreeing to a repayment schedule, it is
important homeowners understand how their lender treats partial
payments. Some credit partial payments toward the balance
immediately, while others hold the money in a “suspend account” until the
full amount is received. Some will return the check to the borrower,
and some will stop accepting payments after the mortgage is seriously
delinquent.
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