Lots of homeowners are behind on their mortgages. The recent melee began a few years ago, as the follow-up to a period of high house prices and the issuance of many back-loaded loans with questionable underwriting to people who had marginal means to repay.
The percentage of mortgage holders in the US who are at least two months behind is a bit over four percent as of second quarter 2013. This percentage is falling, but it’s still higher than the historical average of one or two percent.
Banks will help you if you qualify for mortgage relief
Some of the drop in late mortgages is from more stringent lending practices — no more “NINJA” loans, as well as looking very carefully at the creditworthiness of the borrower. In other words, there just aren’t as many bad loans getting into the pipe. Some of the drop comes from federal aid programs, like the Home Affordable Refinance Program (HARP) and Home Affordable Modification Program (HAMP).
More importantly, though, financial institutions are taking matters into their own hands to cut their losses. If a loan is badly underwater, the financial institution takes a heavy loss if they foreclose. So, they may opt to postpone the foreclosure process to stem off their losses. If this helps the borrower get back on track, well, that’s the best outcome. Foreclosure is still more costly for them than having the mortgage paid back by the borrower.
But if you qualify for mortgage assistance … don’t blow it!
A friend was telling me about a couple who fell onto hard times, and was going to get behind on their mortgage. Their lender did have the ability to adjust the terms of the mortgage — but, the mortgage needed to be three months behind for them to consider it. Apparently, everything else checked out, so in order to get a rate adjustment, they needed to demonstrate — not just say — that the mortgage was in danger of default. Part of the deal, though, was that they get current on the mortgage pretty quickly afterwards.
Well, three months rolled by, and when it came time to make the payments again, the money wasn’t there. They had blown the three months’ worth of payments on Disneyland.
They ended up losing the house.
Lenders in these times sometimes will help you out if it helps themselves out, but if you qualify, don’t be stupid. Use the opportunity for what it is — a second chance with an expiration date — and don’t blow it!