Articles
Saving Your Home from Foreclosure
By Bruce L. Dorner
Attorney at Law
It’s no secret that money is tight. Employers are downsizing. Consumers are not purchasing products. House prices are not rising. Yet, taxes increase. Gas and fuel oil have gone way up. Our ability to keep afloat in these challenging economic times is a struggle.
The question, "do I put food on the table or pay my mortgage," has become a reality. Money management is both a skill and an art form. Using your VISA to pay your MasterCard is not a solution to the problem.
Step one is to sit back and look at your overall financial picture. If the difficulty is short-term only, then you may be able to rely upon savings or limited borrowing to weather the storm. If the shortfall is likely to be more than a month or two, a better plan is needed.
When you are one month behind in making the mortgage payment, it’s not quite as hard to make it up over the next few months and endure the late fees. When your mortgage is three months behind, it is a significant challenge to get caught up. The deeper the financial hole, the more difficult it becomes to recover.
If you have carefully reviewed your cash flow and know that paying the mortgage is not possible, go talk with your lender. Bring your monthly budget and show the lender that you can’t afford to make the current monthly payment. Have a clear idea of what you can afford and how you are going to meet the burden. Perhaps they can work out a new payment schedule that would fit more comfortably. Perhaps they can defer some of the interest until a later point in time. Yes, it will likely result in more interest payments over a longer term, but at least you’ll be able to keep your house. Be sure to take notes and follow up with written confirmation of any agreement you reach. And, of course, be sure to meet your part of the deal — make the new payments in a timely fashion.
If your lender is not a local bank or institution, be sure to deal in writing. You may start the inquiry by phone, but there is nothing better than having the presentation and their response in writing. If you use email, be sure to save all the email and print out a copy for safekeeping in the event there is any question in the future. It is a contract. Get it in writing!
If your lender isn’t cooperative, you may have to explore whether or not it makes financial sense to keep the house or to sell it before you risk foreclosure and potential loss of the equity you have accumulated. (Equity is the sale price of the house, less the mortgages, liens, and costs of sale. It’s what you get in your pocket after all the necessary charges are paid.) Sometimes, selling now preserves your credit rating, which enables you to buy another house when your financial distress resolves.
Selling the house is only one option. You’d still have to find a place to live and the cost for rent, especially in southern New Hampshire, is likely to be as much as the mortgage and taxes you’re already paying. It is not an easy puzzle to solve!
There has been a great deal of press about "predatory lending," and "sub-prime" mortgages. These are techniques used by some aggressive mortgage lenders to get the consumer in the door with the promise of a great deal. Some offered mortgages at very low interest rates. However, the interest rates increased significantly after a few years. The monthly payment skyrockets and the home owner can no longer afford the mortgage.
There are many variations on this theme. The short story is that if the deal seems too good, it probably is! Reading loan and mortgage documents is challenging. Most consumers don’t hire an attorney because they think that everything is just a "standard document." Not true! Each bank and lender has the opportunity to lend on terms and conditions they think appropriate. Yes, there are some Federal and State guidelines, but the goal posts are relatively far apart and the lenders are quite adept at working within those financial goal posts.
A new type of business has risen as a result of the increase in home mortgage foreclosures. They are generally called Foreclosure Consultants. These are people who understand the lending climate, know how to help consumers work out arrangements with their lenders, and will, for a fee, provide these and other related services.
Our state legislature recognized that Foreclosure Consultants might take advantage of people already in distress and suggest options which might be self-serving. After all, people who are staring down the barrel of the foreclosure gun may not be thinking clearly. To protect consumers, the New Hampshire legislature enacted RSA 479-B. This law mandates significant requirements for those who wish to engage in the business of helping people avoid foreclosure or to work out other settlement arrangements.
RSA 479-B establishes a fiduciary duty between the foreclosure consultant and the customer. It requires a comprehensive written contract which must be signed by the parties, witnessed and acknowledged in front of a Notary Public or Justice of the Peace. It must also provide for certain rights of the home owner to cancel the contract. If you’d care to review the statute in detail, here is the link to the on-line version: http://www.gencourt.state.nh.us/rsa/html/xlviii/479-b/479-b-mrg.htm
If you find yourself in a financial pinch, don’t sit back and wait for something to happen. Take control of your situation. Consult with your attorney and tax advisor. Review your budget. Develop a plan to manage your resources. Don’t wait for the bank to contact you with a notice of foreclosure.
This article provides general information only. It is not legal advice. You should consult with your own attorney before making any legal decision.
Bruce L. Dorner has served clients throughout southern New Hampshire for more than 25 years. His office is at 80 Nashua Road, Londonderry, NH. He may be reached by phone at (603) 434-2230 or by e-mail at callmylawyer@attglobal.net
