Knowledge Hoop

So, recently I’ve been hearing about people abandoning their homes.  What is that about?  While I know that there are still people out of work, it’s not the jobless individuals that I’m perplexed by; it’s those individuals that are employed but choose to walk away.  It should never be easy to walk away from something that you have given your hard earned money for.  Whether you’ve found yourself the victim of sub-prime lending, job loss, or poor money management, you shouldn’t choose to walk away before you’ve exhausted all of your options.    

The decrease in home values may also factor into homeowners’ decisions to abandon their homes.  I understand how heartbreaking it can be to see the value of your home drop or to one day wake up owing more than your house is worth.  However, I still don’t believe that walking away is always the right answer.  If it is possible for you to avoid foreclosure, you should.  Banks are willing to work with homeowners that are at risk of losing their home or find themselves owing more than their home is worth.  Contrary to what you might think, the bank does not want to foreclose on your home. If you are faced with a potential foreclosure, do not allow embarrassment or shame to prevent you from exhausting all of the options available to you.  After all, a foreclosure remains on your credit report for seven years.    The following are a list of options that homeowners should consider if faced with a potential foreclosure:

• Consider applying for the Home Affordable Modification Program (HAMP).  HAMP is a federally funded program with an objective to assist homeowner’s in modifying their home loans to lower the monthly payment to 31% of their gross monthly income.  If you have an FHA loan, try modifying your loan through the FHA Home Affordable Modification Program
• If you don’t qualify for HAMP, inquire about Home Affordable Foreclosure Alternatives (HAFA).  The primary objective of this program is to help homeowners settle their mortgage debt without going through foreclosure.  Ultimately, the program streamlines the short sale approval process for homeowners that owe more than their home is worth.  While a short sale is not ideal, it is a better alternative than foreclosure.  Although both will impair your credit for a period of time, all things considered equal, you will qualify for credit sooner with a short sale.  Additionally, most loan applications ask whether or not you have ever foreclosed on a property, and by law, you are required to disclose the truth.  Loan applications do not address short sales.  If asked, you can say that you sold your home
• If your inability to pay your mortgage is due to temporary circumstances, you should consider requesting a reprieve.  A reprieve is a written agreement that allows the borrower to make reduced payments for an agreed-upon period of time.  At the end of the time period, the borrower must make their regular payment plus an agreed-upon amount that will cover the portion of the payment not made during the forbearance period
• Consider requesting a mortgage extension.  A mortgage extension is another option for individuals with short-term delinquencies.  If your lender approves a mortgage extension, the delinquent payments will be added to the end of your loan

As you can see, there are options available to you.  Don’t get discouraged, get to work!  We all have experienced a level of disappointment regarding the current state of the housing market.  It will take some time for the market to recover, and home values may never be where they were in 2008 before the recession.  However, home equity is often the most significant contributor to net worth for the average middle class American.  If you walk away, you lose the opportunity to recover your investment.  I hope this Post has been helpful.  Every situation is unique; seek professional advice to ensure that you’ve done everything you can to save your home.