…Have you (or someone you know) ever thought about letting or have let the bank foreclose on your house? I HAVE.
Seriously, in 2008 the economy was so bad that I reluctantly had to tell my bank to kiss my a**. Even though I knew it was going to kill my credit score, hurt my great long-term financial relationship with my bank and inhibit me from getting a mortgage soon after; I allowed the bank to foreclose on my home. Here are 3 of the reasons why.
MY HOUSE COULDN’T SWIM!
Here is how I learned that houses can’t swim … The house that I purchased in 2005, with over $30,000 in equity, all of sudden became worth $50,000 LESS than what I owed the bank in 2008. In three years the value of my home was “under water” by a little over $80,000! How could this be? I drove through my neighborhood and saw an unusual amount of houses with foreclosure notices. But, I was in denial. I was so excited about the new job that I accepted and about relocating to another state where I always wanted to live, that I ignored the signs. I quickly learned that it didn’t matter what I believed my home was worth. Rather, it was all about how much buyers were willing to pay for the properties around my home that determined it’s value. I was also frequently reminded that a property will not sell for more than it is valued, regardless of how much more is owed on the mortgage in a buyer’s market with significant amount of homes for sale. I even thought I would save money by doing a FSBO (For Sale By Owner) instead of turning the property over to a professional immediately. By the time I handed it over to a real estate professional, the market was sinking fast and it was too late. Not working with a real estate professional early ended up costing me more money. I was so mad at myself because I knew better!
I JUST DIDN’T QUALIFY
Say what? A single mother, getting next to nothing in child support and the “sole bread winner” paying ALL of the bills alone, didn’t qualify for a modification or short sale. How could this be? I felt hurt and confused. That’s when the fear started to settle in. “Now, what am I going to do?” “How will I explain this to my son, my family, my boss?” “OMG … foreclosures are public record,” I remembered, “What if people see that my home was being foreclosed?” “How could I help other’s with their financial situations while dealing with my own financial mess?” Unfortunately, there was no Olivia Pope back then for me and Foreclosure Prevention organizations and programs didn’t really exist until after the Foreclosure Prevention Act of 2008.
I felt so embarrassed that my financial dirty laundry was going to be exposed. And, as much as I wanted to be upset with the bank, I was more upset and disappointed with ME.
I WAS JUST ‘SICK AND TIRED’!
Dealing with this situation made me physically, mentally, emotionally and financially SICK and TIRED! My blood sugar and blood pressure was always elevated because of the stress of worrying, which was definitely not good for a diabetic with hypertension. I worried all of time about the fact that my house would not sell AT ALL. It stressed me out more because I was honestly trying to figure out how to minimize the loss to the bank. The stress was literally killing me. It wasn’t that I was emotionally attached to the property. It was that I was emotionally attached to my FINANCIAL INTEGRITY! I had to fulfill my promise to pay back the money I had borrowed. And the fact that I had a willingness to pay but lacked the ability to pay the mortgage, ate me alive. I had sleepless nights filled with crying. I prayed to God for guidance and consulted with my money mentor for advice. I had a great long-term financial relationship with my bank and it really felt like I was going through a heart wrenching, heart breaking, and bitter break up with them. I even started ignoring my bank’s calls, letters and notices. It was that whole “blood from a turnip philosophy and somehow, I convinced myself that if I ignored them, I wouldn’t be as stressed out. Of course, that financial fairy tale didn’t (and still doesn’t) work! The more I ignored them, the more intense they tried to reach out to me. As they should have! I finally realized that if I continued to ignore and prolong the situation any further, I was going to suffer more mentally, emotionally, physically and financially. So, despite the negative social and financial consequences, I had let it go and walked away.
Yes, it killed my credit and my credit score. And, YES, I was not able to apply for a mortgage for several years after. BUT… there was LIFE AFTER FORECLOSURE. I am clear now as to why I had to go through this. I had to experience the negative consequences of my financial ignorance, bad financial decisions and bad timing. I had to experience and feel the pain. This experience helped me to become more compassionate to better help others going through this and similar financial issues. This test turned into my Testimony to share the lessons learned about some consequences and benefits of certain financial decisions, actions and non-actions. I don’t blame my bank for my foreclosure! I wasn’t in an exotic mortgage and I was fully aware of the terms and agreements of the mortgage contract. Not all banks or credit unions were involved in the mortgage C-O-N-spiracy. Most financial institutions helped consumers obtain the American Dream to own their own home. I completely accept responsibility for my bad financial decisions and especially my financial ignorance.
The GREAT NEWS is that today there are now hundreds of reputable resources to help homeowners who are facing foreclosure today.
The office government website for Making Home Affordable (www.MakingHomeAffordable.gov) now has resources to help homeowners avoid Foreclosure as well. Here are a few of their programs.
Modify or Refinance Your Loan for Lower Payments
- Home Affordable Modification Program (HAMP) lowers your monthly mortgage payment to 31% of your verified monthly gross (pre-tax) income to make your payments more affordable. The typical HAMP modification can drop a monthly mortgage payment up to 40%. Many homeowners who qualified for HAMP were able to reduce their payments by $1,000 or more.
- Principal Reduction Alternative (PRA) program helps homeowners who owe significantly more than their homes are worth. This program encourages servicers and investors to reduce the amount they owe on their home.
- Second Lien Modification Program (2MP) helps homeowners modify their second mortgage if the first mortgage was permanently modified under HAMP SM and the second mortgage is on the same property. The homeowner may be eligible for a modification or principal reduction on their second mortgage under 2MP, including a home equity loan, HELOC, or some other second lien that is making it difficult to keep up with the mortgage payments.
- Home Affordable Refinance Program (HARP) helps homeowners lower their monthly mortgage payment by refinancing if they are current on their mortgage and are unable to obtain a traditional refinance because the value of your home has declined. This program helps homeowners refinance into a new affordable, more stable mortgage.
Assistance for Unemployed Homeowners
- Home Affordable Unemployment Program (UP) helps homeowners that are having a tough time making their mortgage payments because they are unemployed. This program provides a temporary reduction or suspension of mortgage payments for at least twelve months while they seek re-employment.
- FHA Forbearance for Unemployed Homeowners. Mortgage servicers are now required by the Federal Housing Administration (FHA) to extend the forbearance period for unemployed homeowners to 12 months. The changes to FHA’s Special Forbearance Program also remove upfront hurdles to make it easier for unemployed borrowers to qualify.
Exit Strategies for Borrowers
- Home Affordable Foreclosure Alternatives (HAFA) is a program for homeowners that cannot afford their mortgage payment and want to move to more affordable housing. Through this program, homeowners may be eligible for a short sale or deed-in-lieu of foreclosure.
- “Redemption” is a period after the home has already been sold at a foreclosure sale and the homeowner can reclaim their home. Of course the homeowner will need to pay the outstanding mortgage balance due and all costs incurred during the foreclosure process.
Also, most financial institutions have their own Foreclosure Prevention programs or departments that may be able to assist you.
Whatever its worth, you are not alone and there is help. So please ask if you feel or think you might need help before it’s too late. If you are on the verge or are now going through a foreclosure, make sure you have a Financial Resurrection Plan. Look out for my blog about the benefits of a Financial Resurrection Plan.
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