HOMEOWNERS? Running Into Possible Financial Trouble? Contact Your Lender! But They Won't Likely Listen, Let Alone Help!
LENDERS OFTEN TURN DEAF EAR UNLESS YOU'RE SEVERAL MONTHS IN ARREARS!
Want the cold water of reality splashed right in your face?
Contact your bank, and ask them what the procedure would be if you foresee trouble paying your monthly mortgage payments - even though you are current on your mortgage payments right now. Often times, they will offer little help - unless you are several months behind on your payments, and it is clear to them you're unlikely to catch up.
Our Team ran into that specific problem with one of our clients owning a condo on the Chicago Neighborhood of Rogers Park, on the Far North Side of Chicago.
The wife lost her job in a corporate cutback. The husband, a server in a casual restaurant, didn't make enough to keep things afloat long-term without his wife's help and income. The couple had a younger child.
When they called their lender, Wells Fargo Home Loans, the most they would offer is forbearance - splitting an upcoming mortgage payment over the ensuing twelve-month period, after a careful review of their current financial situation, income, spending habits and assets. The process could take anywhere between 10 and 30 days for approval. Attempts to further discuss their potential financial hardship with a supervisor were thwarted - or met with little or no response.
Their application for forbearance was closely scrutinized - initially rejected for less-than-complete information, and approved nearly two months later. It only deferred one payment, and divided the delinquent amount among the future twelve payments due.
After hanging on and making ends meet with this higher monthly payment for several months, they began to fall behind - one month, two, then three. They received a notice that foreclosure proceedings would begin after nearly four month's delinquency - Cook County Records indicated foreclosure was filed the following week.
Now, as they contact the lender, they are met with resistance when they attempt to renegotiate loan terms. The only option, says the lender - is short sale - where the bank considers settling for less than the full mortgage balance due after the property is sold and closed.
But their high-leverage position, and declining market value for condos in the Chicago Rogers Park Neighborhood, coupled with high inventory in the area, makes it less likely for a short sale to succeed. (In our experience, even properties that receive a contract for a potential short sale take between two and three months for the bank to approve - and potential buyers often lose patience and walk away!)
This makes foreclosure the most likely eventual outcome!
For well over a year now, most banks and financial institutions offering mortgages have made it clear that contacting them early - before any late payments - is the best way to deal with possible future delinquent payments. For many lenders, however, their actions are contrary to their words!
Today, the percentage of borrowers at least 60 days behind on their mortgage payments rose for the fifth consecutive quarter during the First Quarter, 2008 - - reaching 3.23% of all mortgage loans, according to TransUnion, one of the largest U.S. Credit Bureaus.
Mortgage loans originating in 2007 are going delinquent at a far faster clip than those issued in previous years. Until these delinquencies are resolved, foreclosure numbers, already at record high levels, are likely to grow even further. Read our post via BlogChicagoHomes.com on August 7th for more on the escalating mortgage delinquency numbers.
Companies that service mortgages, and actually collect payments from home borrowers, completed a record 181,000 mortgage workouts in June, up from 167,000 the month before. For those who have yet to become delinquent, however - help is more difficult to come by.
Many homeowners who have Adjustable Rate Mortgage Loans (ARM's) encounter trouble when their interest rates reset after three to five years at a more-affordable level. In one example, a family with a Countrywide Home Loans Mortgage saw their interest rate rise to nearly 11 percent, with the resulting house payment increasing nearly $275!
The borrower was asked to complete a Letter of Hardship, a Financial Statement, a Detailed Budget, and Proof of Bank Deposits - including in-family loans to help them pay their mortgage. Several months passed.
In the end, the homeowners request to modify the loan terms, to a more affordable, fixed-rate loan were rebuffed - because they not yet technically delinquent on their loan payments!
Eventually, they got their modified loan approved - at an interest rate of a more affordable 7.25% for five years - but only after contacting IL Attorney General Lisa Madigan, and complaining in letters to The Chicago Tribune.
Contrary to what you may believe, apparently, acting early when financial trouble is possible doesn't always bring help from lenders. It appears many prioritize the seriously-delinquent far higher - and those being proactive, early, take a back seat.
Read Susan Chandler's article in today's Chicago Tribune for more info.
DEAN MOSS & DEAN'S TEAM CHICAGO
