You've been laid off, but the mortgage payment is still due. With severance, you figure, you might be good for three payments after you pay the utility bill and put some food on the table. But then what?
Don't wait to find out, say the experts.
Notify your lender before you run out of money and explain the situation.
"Call right away," says Theodore E. Reichart, a mortgage banker and spokesman for the Maryland Mortgage Bankers Association. "Let them know what the problem is and what the time frame is. The worst thing is not to communicate."
An informed lender, Reichart says, will tend to be more sympathetic.
His advice is echoed by Frank Fischer of the St. Ambrose Housing Aid Center.
"Come in," he says, "the sooner the better. Then you can look down the road."
Lenders, he says, often will carry a mortgage for a month or two so long as there is a prospect of future income.
"We try to present scenarios that are workable," Fischer says.
With the state fund for emergency mortgage assistance out of funds, homeowners with conventional or Veterans Administration mortgages really don't have an alternative source of financial help unless they have sympathetic and solvent relatives.
A forbearance agreement with a lender -- in which payments are reduced or suspended for a set period with a repayment plan spelled out -- may buy some time, but eventually payments must be made. Some people raise money from family members, others by selling valuables.
St. Ambrose will try to help a homeowner with budgeting, to cut back expenses enough so he can continue to make at least partial payments. Counselors also will look for ways for the homeowner to increase his income, such as taking on some kind of job, taking in boarders or home-sharing.
Those with FHA mortgages, many first-time home buyers, have more relief available.
Forbearance agreements can be worked out with the lender, with the payments made up over a period of time.
If the homeowner is behind three payments or more, he may be eligible for the U.S. Department of Housing and Urban Development's mortgage-assignment program. Under that, HUD pays off the lender and takes over the mortgage directly, and the mortgage terms can be recast. A reduced-payment schedule can be worked out or payments can be suspended for as long as 36 months. The missed amount is then made up through a longer mortgage term or by tacking the amount onto the end of the mortgage. In all cases, the money must eventually be paid and settlement costs are incurred.
To be eligible for the assignment program, the homeowner has to be at least three months in default, to be in default because of circumstances beyond his control, and to have a reasonable prospect of making payments. The property must be his principal residence, and it can be the only FHA-insured property that he owns.
In some cases, the homeowner can sign over the deed to HUD in lieu of foreclosure, lose any equity he has in the home, and continue to live there as a renter.
But, if all else fails, HUD forecloses on the house.
Foreclosure normally is limited to homeowners with little or no equity in their homes. A homeowner with a house worth more than the mortgage can sell the house and at least preserve his equity if he sees no chance of getting the income in time to keep up mortgage payments.
Reichart says a lender may well be willing to accept reduced payments, or even a suspended payment, for a specified period with provisions for repayment spelled out.
But Reichart points out that many mortgage companies sell their mortgages on the secondary market and just continue to service the loan.
In those cases, he says, the mortgage owner may well dictate when to move toward foreclosure.
And sometimes lenders move when they're afraid the homeowner will file for bankruptcy.
"Sometimes lenders jump in to keep from getting caught in bankruptcy proceedings," Reichart says.