Mortgage Help on Underwater House While Unemployed? Yikes.
January 30, 2013 12:48 PM   Subscribe

Laid off and underwater. . . are there any programs that can help me to keep paying our mortgage?

Last year we refinanced our underwater home through the Making Home Affordable program. We barely qualified -- had our home been appraised $250 less, we would have been too underwater to make the cut.

I was permanently laid off from my job at the end of 2012. Job search is going, but it's going slow. I have severance due to me that will be used to make mortgage payments among other things, but it's looking likely that I won't have work super quickly, and unemployment insurance isn't going to cover our expenses even though we've obviously stripped down to essentials. (My husband, thankfully, is still employed!)

Called our mortgage lender and they said there was nothing to be done until we actually couldn't make the payment. Is that true? If it is, what can be done when we reach that point? Open to really any options at this point, but we'd like to stay in the house if we possibly can. . . Snowflake stuff: house is still underwater, credit rating is good, debt to income fine for last year but questionable now since I have negligible income.

(You are not my mortgage professional. However, my mortgage professional was not helpful. Thus, I seek your friendly advice. Thank you, all.)
posted by Kalatraz to Work & Money (6 answers total) 1 user marked this as a favorite
What state are you in? There are some location-specific programs that might help you.
posted by MeghanC at 1:17 PM on January 30, 2013

We're in warm, sunny. . . . no wait. . . we're in Minnesota.
posted by Kalatraz at 1:19 PM on January 30, 2013

Unfortunately, the Hardest Hit Fund, which was my initial thought, doesn't cover Minnesota. Contact the Minnesota Home Ownership Center and talk to them--they'll be able to point you towards resources that might help.

My experience (in Ohio, it must be noted) is that the bank won't even talk to you until you've missed a payment. It doesn't matter if you technically could have made that payment or not--they only know that you didn't pay them. At that point, the bank will send you a letter saying 'Hey, you didn't pay! Pay us double now, please.' When you don't pay that, either, they'll probably either call or send a representative to talk to you--what they offer at that point depends on the bank, the location of your home, the value of the home, etc. I have a friend whose bank was, apparently, very willing to help them with loan modifications, (lowered interest rate; longer term of loan). When our bank talked to us, the options were pretty much foreclosure or, if we could resume payments immediately, marking the account as current on their end and letting us resume normal payments, with the missed payments tacked on at the end of the loan. If you get desperate, it might be worth skipping a payment or two (and socking away the money to may those payments, if it comes to that) so that you can explore your options with the bank
posted by MeghanC at 2:03 PM on January 30, 2013

Are you servicing other debt? Consider not doing that if it prevents you from affording your mortgage. Look into bankruptcy; the automatic stay can save your butt but needs to be timed right. If you have considerable equity, think about selling. If you have little or no equity, consider walking away.

Good luck.
posted by the young rope-rider at 2:07 PM on January 30, 2013

When we were having financial difficulties a few years ago, it was true that our credit union wouldn't do anything until we'd missed at least one payment. So I didn't make the next payment, and then called them. We were able to put our mortgage into forbearance for 90 days very easily, paying only our escrow every month. It meant filling out a one-page form with some general information about our finances. We could have done it for longer had we needed to; in fact, the person I spoke with kept saying, "Are you sure 90 days will be long enough?" I think she was worried that we'd decide it wasn't, ask for an extension, and she'd have to do the paperwork all over again.

I can't say whether your bank will be as easy to work with as ours was, but it was a painless process, and having the mortgage in forbearance was wonderfully helpful. It didn't even mess up our credit report--our CU doesn't report until a payment is at least 30 days late, and by that time we were in forbearance. Once we were in forbearance, they reported it as "paying as agreed." I'd have done it sooner in that crisis if I'd known how easy, and what a relief, it would be.
posted by not that girl at 3:43 PM on January 30, 2013

I would consider the free consult with a bankruptcy attorney. Hopefully, you'll land a job before it comes to that, but knowing your options and knowing what you shouldn't do lest it negatively affect your changes for a successful bankruptcy filing might be important. Good luck and I feel your pain. I got laid off two weeks ago and tomorrow is my final paycheck.
posted by COD at 4:49 PM on January 30, 2013

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