It happens to the best of us – one day you’re gainfully employed and the next day you’re not. Despite the fact that the nation’s unemployment rate is at a 17-year low and job growth is strong, layoffs are still occurring even in the Baltimore/Washington Area.
While unemployment rates have fallen in many other cities across the nation, in a dozen or so states they have actually gone up. From public schools laying off teachers to states laying off workers, if you work for someone else there is no guarantee that you won’t find yourself unemployed.
If you find yourself among the jobless, now is not the time to panic. Read on for some tips to keep in mind while you plan the next steps to take.
Get Some Advice
The U.S. Department of Housing and Urban Development (HUD) offers no-cost housing counselors to help walk you through your options. You can find one in your area on HUD’s website.
If you’ve waited too long and you’re facing foreclosure, contact an attorney. If you are income-qualified, you may be entitled to free legal services. Find out by contacting your state’s legal aid department. You’ll find the contact information for each state’s legal aid office, here.
The first step is to know exactly where you stand financially. Go over all of your monthly bills to determine how much you owe and to figure out ways to cut your budget.
Next, determine whether your situation is temporary or if there’s a chance that your unemployment may be long-term. With this information, you are ready to call your mortgage servicer.
Don’t put this one off. Yes, it’s uncomfortable. It may even be embarrassing, but one of the worst things you can do is crawl into that hole of procrastination that is beckoning. Be proactive.
If you expect to be back at work in the near future, ask the servicer for a forbearance. This is an agreement wherein the lender promises not to exercise the legal right to collect the debt or to foreclose due to non-payment. You will need to agree to the servicer’s plan on how you will get current on the loan and you’ll typically be given a time limit.
In a two-worker household, you may be able to make smaller payments. If this is the case, ask the servicer for a loan extension. While the advantage of this scenario is obvious (your payments will be reduced), the loan will end up costing you more in the long run.
Some servicers will allow the borrower to pay only the interest on the mortgage until he or she is back in the money.
Not all servicers are willing to make these concessions, but they are, by law, required to discuss your situation with you and the earlier you notify them, the more amenable they may be to your proposals.
Get Help From The Government
Although the Home Affordable Modification Program (HAMP) expired last year, the Home Affordability Refinance Program (HARP) is still in effect, but only until the end of September, 2017. You may be eligible for this program if the following applies:
You are up-to-date on your mortgage payments and have no late payments (30 days or longer) within the past six months and have no more than one within the past year.
- Your loan is owned by Freddie Mac or Fannie Mae.
- You obtained your mortgage before May 31, 2009.
- Your loan-to-value ratio is greater than 80 percent.
You can find out if your loan is owned by Fannie Mae, here and click here to find out if Freddie Mac owns your loan. Then, calculate your loan-to-value ratio using Fannie Mae’s calculator.
Fannie Mae and Freddie Mac will offer the new Flex Modification foreclosure prevention program, which kicks into effect on October 1 of this year.
The program will provide a 20 percent reduction in mortgage payments to those who qualify. You may qualify even if you’re 60 days delinquent on your loan but it is also an option for those who are current.
Again, this program is limited to loans owned by Freddie and Fannie.
Although asking for help may be uncomfortable, losing your home is worse. Seek help right away if you find yourself unemployed and unable to make your house payments.
Once the hardship is over, you may be able to ask your lender/loan servicer for a loan modification. They’ll want you to be back to work though.
Another option may be bankruptcy. A bankruptcy will “stay” the foreclosure … a last resort if things get to that point.
Another alternative is to sell the property. If there is equity in the property (It’s worth more than you owe), then you may be able to do a standard sale and walk away with some money. If the property is worth less than you owe than you can still sell it and not have a foreclosure on your record. I, as your Baltimore/Washington Area Real Estate Agent, can list the house for you and have the sale negotiated by a professional short sale negotiator. The Short Sale Negotiator will contact your mortgage company and work with them to hash out the details on their side. Contact me ASAP so that we can get things moving. Every day counts.
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