What to Do If You Can’t Afford Your Mortgage But You Want to Keep Your Home

Effective January 1st, 2017

You just lost your job. Your mortgage payment has increased because the interest rate has risen. Property taxes have gone up. Events like these can make you realize that you can no longer afford your current mortgage payment. What should you do if you want to keep your home?

1. Contact the bank. As soon as you know that your circumstances are about to change, so that you will not be able to afford your current mortgage payment, contact your bank, let them know that you want to keep your home, and find out what kind of programs they have to help you. Each bank has its own programs to help homeowners and many have information on their website as to the types of mortgage help programs and how to apply for them. Depending on your loan type, you may also be eligible for government programs that have been set up over the last few years to help homeowners who have been hurt by the current economic crisis. You may have to make several calls, or file several applications before getting an answer as to what type of help you and your loan may qualify for.

2. Contact a local HUD certified housing counselor as soon as possible to assist you. There are HUD certified housing counselors providing services in each county in the State of New York. The counselors are trained to assist homeowners in working out a budget, preparing and forwarding loan modification applications to banks on behalf of homeowners, at times preparing affordable proposals and recommendations to be submitted to the bank for consideration, and are up to date on all of the requirements of the bank’s and government mortgage programs. The earlier you can get the assistance of a housing counselor, the better, because as time goes on, there are more fees and other possible expenses connected to your mortgage that will have to be taken into account in any possible workout. The housing counselor can also help follow up with the bank and keep the process moving. Don’t be tempted to go online and hire a counselor or loan modification company over the internet. There are local services available, some at no cost to you, and it is important that whoever you are working with is familiar with the local housing market. Please be aware of scams soliciting homeowners in foreclosure with offers to help save the home. You may receive letters in the mail or view ads online offering help with foreclosure. Not all of these solicitations are legitimate. The New York Attorney General has set up a website where you can find HUD certified free housing counseling agencies in your area, and report scams: agscamhelp.com. You can also contact Legal Aid to get contact information for the local housing counselors in your county.

3. If you are working directly with the bank, be persistent, do not give up, and keep copies of all communications/letters/e-mails from the bank, or things that you send them. Also, keep detailed notes of dates and times of your contact with the bank by phone, or their contacts with you. If possible, find out and note the name of the person you are speaking with. Don’t assume that because you spoke with a bank representative once and submitted an application for review, you need to do nothing else. Bank representatives are overwhelmed due to the number of people seeking help, so call every few weeks to keep your file in the front burner, and to make sure that they have all the paperwork they need. If you are working with a housing counselor, make sure that you give your counselor copies of all communications with your bank, and keep the counselor up to date on any changes in your financial circumstances. Discuss with your housing counselor whether you are to contact the bank, or whether the counselor will be doing so on your behalf.

4. Submit all documents that the bank or your housing counselor request, even if you have to do it several times. As frustrating as this may be, your file will not be forwarded to the next step in the review process unless the package is complete. Expect that you may have to send updated income information including pay stubs, bank statements, and budget forms every few months.

5. DO NOT MOVE OUT OF YOUR HOUSE. Many of the programs offered by the banks and the federal government require that you reside in the house and that it be your primary residence. If you move out of the house, you will likely not qualify for any of the programs that would be available to you if you still lived in the house. Also, even if a foreclosure lawsuit is started against you, the house remains yours until the end of the foreclosure which could take months to 2 years after the lawsuit is started, and many things could change during that time.

6. Try to put some money aside each month. As hard as it may be, pretend you are making a mortgage payment and put some money aside each month. Some programs require that you pay a deposit as part of any modification agreement or workout. Also, it shows the bank representative and court, if you are in foreclosure, that you will be able to make a mortgage payment – that you are not spending every bit of income coming into the house. If you have nothing left at the end of the month, how will you afford a mortgage payment? If you do not work something out with your bank and decide that you cannot keep the house, you at least have that saved money to put toward new housing, a move, or bankruptcy filing, if that is what you choose to do.

7. Be sure to carefully review any agreement you are offered by the bank. Any agreement you make with the bank to change your mortgage terms, or reduce your mortgage payments, even on a temporary basis, is a contract and will be binding on you. You should have your housing counselor review it, or an attorney if possible. Don’t be afraid to ask questions of the bank representative if there is anything you do not understand, since once it is signed by you, the bank will assume that you understood your responsibilities under the new agreement, and hold you to them. If you are given a deadline for returning the documents and/or are required to make a payment with the signed agreement, be sure to do so. If you do not, the bank may cancel the agreement and you may have to start the process over.

Most important in this whole process: Do not ignore the problem, it will not go away. The sooner you try to work something out, the more likely you will be able to do so.

To see if you qualify for free legal assistance, contact your local Legal Aid office.