I talk to people who are going through a foreclosure or being effected by foreclosures in their neighborhood almost every day. After a while you learn a few things, and I would like to share the top five mistakes that good people make all the time when facing foreclosure.
1. Waiting Too Long To Get Help.
Early is always better. If you lost your job, now is the time to seek help. If you are running out of savings to pay all your bills, now is the time to seek help. If your interest rate is going to adjust to a very high level in the near future, now is the time to seek help. If you have missed just one payment, now is the time to seek help. Don’t hide the bills. Don’t ignore letters from your lender. Don’t be scared to talk to your husband or wife, or even ashamed to talk to your family members. Do not wait. Get help.
Early is always better…but remember that even if you’re further along in the process there still may be options for you. Get help. This may sound mean, but there are people out there that know a lot more about foreclosure and preventing foreclosure than you do. Take advantage of them. Use their knowledge to help guide you and take control.
2. Refusing To Talk To Your Lender or Mortgage Servicer.
I know that you do not like your lender or mortgage servicer. I know that they are often irrational. I know that you are placed on hold. I know that they lose your paperwork. I know that they do not respond to your letters. I know that you can’t get answers to your questions or approval for a short sale. I know that every fiber of your body is telling you to give up. But, don’t.
You need your lender. You need your mortgage servicer. If you want to stay in your house and stop the foreclosure, they are likely the only ones who can make that happen.
Now, I am not trying to defend lenders and mortgage servicers. They have not responded too well to this crisis. They dropped the ball, and they have done a disservice to homeowners and their own investors, but the reality is that they are totally overwhelmed. They do not have adequate staff. They do not have procedures in place for this financial crisis. Every time they get procedures in place, the policy may suddenly change and they need to get new procedures in place.
Have some patience, and try, and then try again.
3. Not Saving Money.
There often reaches a point when you decide that you are no longer going to send any money to the lender or the lender sends the money back to you. It is a difficult point, because this is usually when the likelihood of losing your home becomes very real. Different people react in different ways, but too many people lose hope and stop saving money. Even though they no longer have a mortgage payment, they don’t set any money aside. They don’t save.
I know what you’re thinking: “I don’t have any money to save. That’s why I’m in foreclosure, you idiot!” But, hear me out.
You have more money than you think, and, if you are serious about stopping the foreclosure, then you need to save money. Lenders are far more likely to give a loan modification to someone who has savings or can pay them a lump sum. For example, if you want a lender to lower your monthly payment to $1,200 a month, then you should deposit $1,200 every month into a new savings account. It will show the lender that you can really make this payment. It will show the lender that you are responsible.
And, even if you don’t stop the foreclosure, you’re going to need money to pay for your move. You’re going to need savings for a deposit on an apartment or a rental house. You’re going to need money for future emergencies, and you’re also going to need money to help build up your self-esteem. So, just because you are no longer making a mortgage payment every month, does not mean that you shouldn’t pretend that you are making a mortgage payment every month. Even if it is not a lot, save something…even $25 per month. It adds up, and you will not regret it.
To jump-start this process, I have a four-step process. First, pick an amount—any amount— and write a check for that amount or gather up the cash. Second, go to your local credit union and open a savings account with that money. Third, go to your favorite restaurant and order your favorite dessert as a reward (even at the fanciest restaurant in town, dessert is relatively cheap). Remember, just order dessert, not the full meal…let’s not get carried away. Fourth, repeat steps one through three every month.
4. Forgetting to Forgive
People make mistakes. Nobody is perfect. Too often foreclosure leads to divorce, because one spouse blames the other. Too often foreclosure leads to depression, because one person blames themselves and won’t let it go. Too often foreclosure ends friendships, because you isolate yourself from friends and family.
That’s when it’s time to forgive and look toward the future.
5. Thinking You Can Buy A Miracle.
If you are telemarketed by a for-profit counseling agency or debt management company, hang-up the phone. If they send you mail, throw it away. If they knock on your door, politely tell them to find another sucker. These places are scams. Most of the time, they offer no help and make your situation even worse by cutting you off from real housing and debt counselors. And, even if they do offer a service, that service is already available to you for free through multiple non-profit and government agencies. The bottom-line is that paying a for-profit counseling agency or debt management company is flushing your money down the toilet.
Just as for-profit counseling agencies and debt management companies won’t get you a miracle, neither will the foreclosure rescue scams. If you’re approached by someone offering to buy your house and then sell it back to you, run away. Contract for deeds and leases with the option to buy are tricks to get your house. They don’t want to save your house. They want your equity.
Mark Ireland is a consumer rights lawyer, and will be posting at Caveat Emptor until March 20, 2009.