Can't pay mortgage? It's time to seek help
Addressing the issue is key; your lender or federal programs can offer assistance
By Stephanie Armour/USA Today
Rising payments from adjustable-rate mortgages, mounting job losses and an epidemic of unaffordable loans have thrown more homeowners into a dire situation: They're no longer able to pay.So what should you do if you absolutely can't pay your mortgage?
Here's what experts recommend for homeowners at risk of being unable to make their loan payments:
Don't do nothing at all
The one thing not to do is to take an ostrich-in-the-sand approach, ignoring pleas and letters from lenders. Lack of communication with a lender will only exacerbate problems. Lenders who don't hear from delinquent mortgage holders often have to start legal action that can lead to foreclosure.
Ask your lender to help
Typically, lenders don't want a home to go into foreclosure, because it saddles them with both a house and a financial loss. Many lenders are willing to work out alternative payment plans with homeowners who have fallen slightly behind or are struggling to make payments. These steps might include lowering the mortgage rate, extending the life of the loan or letting homeowners make up missed payments through a payment plan.
"I'd call your (mortgage) service provider and say, 'What can you do?' " says Mark Zandi, chief economist of Moody's Economy .com.
Try not to delay. Homeowners should contact their lenders as soon as they know they'll have trouble making their mortgage payments. And they should keep copies of all correspondence and a log of all the service providers they speak with.
Have a plan
One mistake some mortgage holders make is simply to call their lenders and say they can't pay, says Joel Naroff of Naroff Economic Advisors. Instead, they should suggest a loan-modification or repayment plan.
"Approach them and say, 'This is what I can't pay,' and not just that you can't pay," Naroff says. "You have to have a suggestion -- say, 'I can pay this much every month.' "
Seek outside assistance
Outside assistance programs are an option. The Federal Housing Administration can help subprime borrowers who can afford the starter rate on their subprime mortgages -- but not the higher payments once they adjust.
The Bush administration expects about 500,000 families to refinance into FHA-insured prime-rate mortgages by year's end. The relief plans allow the FHA to insure new, more affordable mortgages.
The Department of Housing and Urban Development can sometimes help those with FHA-secured loans (800-569-4287). The Homeownership Preservation Foundation, a member of the Hope Now Alliance, (888-995-HOPE) is another resource; it deploys counselors, servicers, investors and others to try to help at-risk homeowners remain in their homes.