Lenders have several workout options up their sleeves:
Partial reinstatement. Under this plan, the borrower would agree to begin making regular payments and make up what is owed in, say, 12 monthly installments over the next year.
Short-term forbearance. Here, the lender will suspend your payments for, say, three months or reduce your payment for six months, and then you'd make up the difference in some kind of repayment plan as described above.
Long-term forbearance. Payments might be suspended for anywhere from four to 12 months, with a corresponding repay plan to follow.
Loan modification. This would be a permanent change in one or more of your loan's original terms. The rate might be cut, the payment period extended or both so that the payment once again becomes affordable.
So my advice is to get on the horn right now with your lender. Make sure you talk to the workout department, though, not the collections folks. Though many lenders are training their repo staff to spot people who need a break and hand them off to the right people, most are bill collectors, short and simple. If the person you speak with has no idea what you are talking about, ask to be transferred to the chairman's or the president's office. You can bet they'll know whom to transfer you to.
You don't need anybody to speak for you, either. So stay away from the growing group of charlatans who are preying on financially distressed homeowners by offering -- for a fee, of course -- to act as a go-between between you and your lender. They don't have any more of an inside track than you do.
If you honestly feel you need to have someone holding your hand, contact a local credit or homeownership counseling agency. These nonprofits don't charge a thing. In fact, in some cases, lenders are paying them to go out into their communities to persuade troubled borrowers to contact their lenders.
The Department of Housing and Urban Development has a list of government-sanctioned counselors on its Web site, www.hud.gov. Also try the National Foundation of Credit Counselors, www.nfcc.org, or the Homeownership Preservation Foundation, www.995hope.org (888-995-HOPE).
Thursday, December 13, 2007
What Is A Poor Boy To Do?
I was asked today at a luncheon about the current state of affairs in the residential lending market and the attitude of the lenders towards homeowners with 'troubled times' ahead. By coincidence, I ran across the following article from Marketwatch this evening about the lender's attitude towards forebearance: