If you or someone you know is facing a challenge making their mortgage payments, Jon Sterling’s new book, "Mangled Mortgage," explains how to avoid some of the most common pitfalls you may face.
Although written for real estate professionals, "Mangled Mortgage" is a great book for anyone who deals with distressed property. Sterling, a team leader for Keller Williams Real Estate, has tested his approaches in a number of the toughest real estate markets in the country. The tips he shares with his agents can help you or anyone you know who may need mortgage assistance.
Pitfall #1: Paying for a loan modification
Have you or someone you know lost a job? Are you facing a health or other financial emergency? Do you want a lower interest rate? There are many valid reasons to request a mortgage modification. According to Sterling, the most common mistake that people make is paying for a loan modification. Instead, he recommends that you first exhaust the free resources before writing a check to someone to help you.
The best place to start is with your lender. Most lenders have a dedicated loan modification department to help you. Sterling’s experience is that this can be hit or miss. Some lenders have fully staffed departments and others may have a single person trying to cover a large geographical area. You must be persistent. Also, whenever you speak to someone at the lender, obtain his or her contact information to make tracking easier.
In addition, to the lender programs, many municipalities also offer programs to help homeowners avoid foreclosure. There are nonprofit organizations such as HopeNow.com and NACA.net that are dedicated to helping you stay in your home. NACA.net is a group of consumer attorneys (not real estate attorneys) who can help you delay or stop foreclosure entirely. Exhaust these free resources before hiring a firm or a lawyer to do this for you.
Pitfall #2: Ignoring correspondence from the lender
Most lenders will attempt to contact you if you fall behind in your payments. They have a variety of programs that can help you stay in your home. Don’t ignore their correspondence. There is no downside in speaking to them and they may be able to help you keep your home. Ignoring the situation will not improve it.
Pitfall #3: Not contacting the lender first
As soon as you encounter a problem, be proactive. Immediately contact the lender if you have a valid reason for falling behind on your payments. If you do fall behind, a number of companies may contact you with offers of "help." Responding to these unsolicited offers of "help" is one of the most common ways that people become victims of mortgage scams. If you need a referral, HopeNow and NACA.net are great places to start.
Pitfall #4: Becoming impatient
The process of collecting your financial information, finding the right contact person, and getting a response from the lender can take six to 12 months. Remember, lenders really don’t want your house back in foreclosure. Most are eager to help people with legitimate hardships. Nevertheless, they need to be thorough enough to keep those without hardships from taking advantage of the system. A decision on a loan modification or short sale will not happen overnight. Check in periodically and hang in there. …CONTINUED
Pitfall #5: Not researching your options online
Do not believe everything you see on TV, hear on the radio or read in the newspapers. Pay attention to what people are saying, but do your own research. Take the time to obtain the best possible information before making a decision.
Pitfall #6: Hiring an inexperienced agent to assist with a short sale
The term "short sale" refers to selling your property for less than what is owed on the mortgage(s). Short sales are generally better for your credit and better for the lender. The challenge is the negotiation can take up to a year. Most buyers don’t have this level of patience. Short sales are paperwork intensive, time-consuming and full of obstacles. This is not the time to hire a friend or relative who is in the business. You need a professional Realtor who has a proven track record dealing with these types of transactions. If the agent you’re considering cannot produce names, addresses and testimonials from past short-sale sellers, continue looking until you find someone who can.
Pitfall #7: Failure to check the credentials and references of anyone you hire
Ask for references, call the references and check the person/company with a quick Google search. Type in the name of the company and then the word "complaints" into the search box. New technology tools such as Yelp and StepRep make it hard for the bad apples to hide. Keep in mind that one positive or negative review doesn’t make someone a crook or a saint. Do a thorough search.
Pitfall #8: Waiting until you’re out of money before you act
If you drain your bank and investment accounts, your options are limited. It’s better to contact your lender as soon as you believe there may be a problem. The sooner you take action, the more options you will have. It’s also the best way to protect your credit score.
Pitfall #9: Letting the house go to foreclosure because you were afraid to ask for help or didn’t know where to turn for help
The key to getting help is taking action. A foreclosure should be the absolute last option. The lender does not want to foreclose on your house. There are great resources out there. If you or someone you know is in mortgage trouble, there has never been a better time to ask for help than now.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com.
What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.