It looks like banks are finally moving on the backlog of delinquent mortgages. Default notices surged 33% in August, with a 200% increase by Bank of America.
That means many Americans are receiving a scary letter for the first time. Here’s what you should do if you are one of them:
Contact your mortgage lender immediately. Avoiding notices and calls will only make things worse, as the sooner you communicate, the better chance you’ll have of setting up a refinanced mortgage plan.
When you do meet with your lender, make sure to bring the necessary paperwork, including medical records, check stubs, and termination documents. Try to pool as much money together as possible to get your mortgage payments in order.
To help you further prepare, consider contacting a housing or credit counselor to help you prioritise your debts and go over your options. Such services are typically free or available at a low cost. You can call the local office of the U.S. Department of Housing and Urban Development or Homeownership Preservation Foundation at 888-995-HOPE.
If you don’t think your current financial situation is going to improve anytime soon, you may want to consult with a bankruptcy lawyer. He or she can inform you about the specific mortgage laws in your state and offer an approximate timeline for how long you have before you lose your home.
And if you think you will lose your home, consider selling or short-selling it. Short selling would forgive any remaining balance between the sale price and mortgage balance, but your lender must first approve this.
As a last resort, consider a deed in lieu of foreclosure, which would transfer the title of your property to your loan servicer and cancel your remaining debt. You will lose your home, but the deed will keep a foreclosure mark off your credit report.
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