Financial Hardship and Renegotiating Mortgage

January 29th, 2009, by

Q: I was wondering if mortgage lenders would help adjust or refinance loans even if the borrower hasn’t missed any payments yet. We have two monthly mortgage payments totaling $2,100. For the past year, I’ve been a stay-at-home mom and, of course, have no paycheck coming in. While we haven’t missed a mortgage payment or even been late paying, we often have to dip into savings to cover the monthly bills. And we’ve cut back about as much as we can. Because our main loan is interest-only, we have very little equity built in our home. Therefore, I don’t think we can refinance.

If I call the lenders and explain the financial hardship we’re in, do you think they’d be willing to work with me even though I haven’t missed payments?

A: You are right to be concerned because you are dangerously close to falling behind on your mortgage. But of course you know that.

So, yes, call your lender and join the long queue of people in the same situation. You are right that, ironically, you are at a disadvantage because you haven’t missed a payment.

Think of it from the lender’s perspective. You signed a mortgage promising to pay a certain amount every month. You’ve paid that amount, even if it’s been a hardship. So, why would they renegotiate your loan if you’re paying as agreed? There are so many people ahead of you calling and who have received foreclosure notices, that it’s likely you won’t get any assistance on your first try.

But, having said that, lenders also are acutely aware that there are many homeowners like you, who are just a paycheck—or drained savings account—away from losing their homes.

So, here’s what you should do:

  • Call your lender right away and see if there is anything the company can do to lower your payments for now. But, at some point, you need to get into a fixed rate mortgage.
  • If that doesn’t work, contact a HUD-approved housing counselor. The “HUD Approved Housing Counseling Agencies” page of the agency’s site can help you find one near you, or call toll free (800) 569-4287.
  • I also want you to view a list of very useful “Tips for Avoiding Foreclosure” provided on the HUD site.

I know this is a hard time for you, but at least you are looking for help before you miss that first mortgage payment.

Last modified: April 18, 2011 at 2:49 pm