Released January 15, 2009
MADISON, Wisc. -- -In the wake of widespread job layoffs and a faltering economy, many Americans are finding it a struggle to make their rent and mortgage payments.
If making your monthly housing payments is a challenge, J. Michael Collins, University of Wisconsin-Extension family living educator and assistant professor of consumer finance at the UW-Madison School of Human Ecology has some suggestions that can help.
To avoid losing your house or being evicted from your rental unit, you must plan carefully. “If you rent, tell your building manager or landlord you will be late with your payment before the rent is due,” Collins advises.
If your financial situation will improve in a few months, suggest that you make smaller payments with the understanding that you will pay the rest of what you owe as soon as possible. “It costs money to find new tenants, so the landlord may be willing to work out a solution with you,” Collins says. If you will be short of money for more than a few months, your best bet is to consider moving to lower-cost rental housing, he advises.
If you miss a mortgage payment, the lender will notify you that the payment is overdue and may charge a late fee. If you don’t make the payment or contact the lender after two or three months, the lender may start foreclosure proceedings--the legal process of selling your home to pay off the debt.
“The most important step you can take is to contact your lender before you miss a payment; lenders will work with you on a payment solution to avoid the time and cost of foreclosure,” Collins says. In addition to calling your lender, you might find help by calling the HOPE hotline at 888-995-HOPE or going to the organization’s website at http://www.995hope.org/
What can a lender do if you miss mortgage payments?
That depends on who owns the mortgage or whether your situation is temporary or long-term. For example, if you are laid off and expect to be called back to work soon, the lender may let you reduce or defer your payment until you return to work. If your situation is longer-term, you may need to work with the lender to restructure the loan with reduced payments and a longer repayment time. There are an increasing number of special programs you might qualify for to modify the terms of your mortgage payments.
“Before you agree to any new terms on your loan, be sure that you understand the costs and can follow through with the arrangement,” says Collins. “If you can’t keep up with the new payments, you could still face foreclosure.”
If you don’t think you can keep your home, the best long-term strategy is usually to keep making payments and prepare the home for sale. Talk to your lender about accepting a lower payoff amount if you cannot sell the home for as much as you owe.
“Lenders lose tens of thousands of dollars on a foreclosure,” says Collins. “Many lenders will provide help to sell the home if it avoids foreclosure. And you avoid long-term damage to your credit record.”
Paying your property taxes is next in importance. Don’t forget that if your lender is escrowing your taxes and you are not paying your mortgage, you are behind on your taxes, too. If you can’t pay your property tax bill, contact your county treasurer (listed under local government in your phone book) right away. Even if you miss some payments and resume them later, you may still face tax foreclosure. The county treasurer can tell you how to prevent this.
Keeping up with your homeowner’s or renter’s insurance payments is also essential. These policies protect you in case of loss or damage to your property. “If you can’t make your insurance payment, call or write your agent or the company before the payment is due,” says Collins.
Local utilities may stop service if their bills aren’t paid. Fuel suppliers aren’t allowed to shut off heat during the winter, but you will still be required to pay the full amount owed--with interest. If you can’t pay, contact your utility company before the bill is due or you need fuel. These companies often have counselors to help you work out realistic payment plans. Also, find out from the utility if you are eligible for low-income home energy assistance or other benefits.
“The most important step to take is to pick up the phone. Call your creditors. Be patient—you may be on hold for awhile. Remember, if you act promptly you have a good chance of coming out okay,” says Collins.
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http://www.uwex.edu/news/2009/01/letting-mortgage-lender-or-landlord-know-when-payment-will-be
Contact: J. Michael Collins, (608) 262-0369
