By John G. Merna, Esq.
Foreclosures are increasing at an alarming rate. Recent data from MarketWatch shows a staggering seven-fold surge in foreclosures during the first month of this year. According to their reliable sources, approximately 33,000 mortgages have been pushed into foreclosure. The impact of the pandemic on the economy caused a significant drop in foreclosures in 2020 and 2021, thanks to the government’s moratorium on foreclosing federally-backed mortgages. However, now that the moratorium has been lifted, we are witnessing a wave of delinquent or defaulted mortgages going through the modification process, or nearing its completion. This scenario assumes that the loan in question was backed by the government and that the missed payments were due to temporary financial hardships.
What To Do If You Mortgage Is Still Delinquent?
The first thing to do if your mortgage is still delinquent is to get on the phone with the lender. The “normal” of the pandemic is over. Believing that you have to be modified is a dream. Contact your lender and ask how to expedite or complete the process. If you don’t get an answer with definite steps to move forward with the modification, call an attorney.
There are a few reasons your loan may not be eligible for modification.
- You loan is not government-backed. This doesn’t mean you can’t get a modification just that you do not have the momentum of the federal governments interest in not seeing a “foreclosure crisis” behind you.
- If your delinquency was not due to COVID, you may not qualify even if you have a government-backed loan.
- You income does not cover you expenses. Too often I talk to people that believe a modification is about making the house affordable for them, i.e. lowering the payment to what that can afford. THAT IS NOT IT. A modification is based on determining if the borrower can afford with some “modification” to pay the terms of the mortage agreement. In laymen’s term, can you convince the lender that you can pay back the principle and their profit, which is the interest?
- You change, which primarily means lower income, is permanent not temporary.
No Modification Yet? Call An Attorney.
As the news article by MarketWatch implies, the pandemic reality if over and we are moving back towards the pre-pandemic reality where foreclosures were prevalent.
You need to be further warned. Given the recent run-up in home values, most homeowners that have owned their homes at least five years have some equity. Why is this important? It is important because at the end of the analysis by a mortgage lender, if they on sitting on the fence as to whether to modify you delignquent loan or foreclose on you your equity can tilt the decision towards foreclosure.
This seems a cruel and self-serving reality, but remember … you defaulted which threatens lenders with a substantial financial loss. The best thing you can do to tilt the scale in the favor of modification is to show as clearly as possible that your financial difiiculties, whatever the source, is past. This means proving “actual income” avaialable to pay all your debt. If your income has not return to previous levels you have one other option… reduce your expenses fast. This primarily means your unsecured debt like credit cards, personal loans, etc. This may require filing a bankruptcy quickly to your unsecured debt off the balance sheet.
Many have to wake up to this reality. I have hear frequently that clients were optimistic the could show the mortgage lender they could afford their home while a significant amount of their debt was going unpaid. Warning: Unpaid debt to a mortgage lender is equivolent to a lien on your property and a garnishment of your wages which means you won’t be able to afford the house in the future. So you can understand they many not want to modify you even if you say you are going to allocate to pay the mortgage before all other debt. Unfortnately, they will not take your word. You need to get the debt off the balance sheet or risk your house being taken.
You Are Running Out of Time
Once again, if you have not gotten your mortgage modified and sense push-back from the lender in the form of repeated requests for the same documents, non-communication, or poorly explained delays. Contact us immediately. A foreclosure can be started and completed in as little as five weeks in Virginia. Get a “Plan B” now. Don’t wait until they run the clock down on your.
Call Merna Law today for a free consultation with an attorney and get the facts on foreclosure and bankruptcy. 800-662-8813.
