If you’re struggling financially, you’re probably worried about your mortgage. Lenders are offering help, but how do you know what’s right for you? Here’s what you need to know:
Q. I hear lenders have programs to let homeowners delay their payments for up to a year. I’d like to apply, so I can free up money to pay other bills. Is this a good idea?
A. If you can pay your mortgage, pay your mortgage. A delayed payment plan – called a forbearance – can help you stay in your home if you have no income and no other alternatives, and if you expect to be able to resume payments after the forbearance period is up. You will have to pay back all of the payments you missed once the forbearance period ends. A housing counselor can help you learn how these programs work.
Generally, there are three repayment options. The method of repayment depends on what type of loan you have. Not all borrowers will be eligible for all options:
in one lump sum at the end of the forbearance period
added onto your existing monthly payments over a set number of months
added to the end of your loan as additional payments or as a lump sum
Q. What do I do once I’m receiving a forbearance plan?
While you’re in the forbearance period, keep the following things in mind:
If you pay your taxes, insurance, or HOA/Condo fees separately from your mortgage, then you must continue making those payments during forbearance.
Keep written documentation on hand. You want to make sure that you have this documentation available in case there are any errors on your monthly mortgage statements to ensure that your statement reflects the assistance provided.
Pay attention to your monthly mortgage statement. Continue monitoring your monthly mortgage statements to make sure you don’t see any errors.
Stop or change auto-payments for your mortgage. If you are having your mortgage payment automatically deducted from your bank account, make sure you make any necessary adjustment to avoid any fees or charges.
Keep an eye on your credit. It’s a good idea to routinely check your credit reports in order to make sure there are no errors or inaccuracies. If you stop making mortgage payments without a forbearance agreement, the servicer will report this information to the credit reporting companies, and it can have a lasting negative impact on your credit history.
Once your income is restored, contact your servicer and resume your payments. With forbearance, you still owe the payments that you missed, but fewer missed payments mean you’ll owe less down the road.
Save as much money as you can toward paying off the delayed amount when it comes due. If you continue to receive some income that turns out to be more than you need for your bills and expenses (including anything you keep paying on your mortgage), consider putting the extra money away so you can use it to pay off what’s needed later.
Q. How do I watch out for scams?
A. Scammers take advantage of vulnerable consumers during disasters and financial shocks. Be aware of scams that falsely promise financial help with your mortgage loan or foreclosure case. Scammers may:
Charge a high up-front fee for their services
Promise to get you a loan modification
Ask you to sign over your property title
Ask you to sign papers you don’t understand
Tell you to make payments to someone other than your servicer
Tell you to stop making payments altogether
Promise you payments in connection with providing credit card numbers and other personal information
If you believe you’ve been the victim of a mortgage scam, call the New Mexico Attorney General’s Office: Toll Free 1-844-255-9210
Q. Can a loan modification help me if I’m behind on payments or in foreclosure?
A. A loan modification is an agreement between you and your mortgage company to change the original terms of your mortgage—such as payment amount, length of loan, interest rate, etc. Sometimes you can reduce your monthly payment to a more affordable amount. You may be able to catch up on missed payments if the lender is able to move your arrears (the amount you are behind on your mortgage) to the end of the loan. A HUD-certified housing counselor at USBC an explain the process and help you apply.
Q. I need to move but my house is worth less than what I owe. What options do I have?
A. You might be eligible for a short sale or a deed-in-lieu of foreclosure. In a short sale the lender agrees to accept less than the full amount due from a potential buyer of the property, and takes the house back in settlement of the debt. Short sale or deed-in-lieu programs usually require that you list your house for sale with a realtor for at least 90 days. Make sure that your lender will forgive the entire debt if you do a short sale or deed-in-lieu. And remember that the amount of debt forgiven will be considered income to you for tax purposes and you will be expected to pay taxes on that amount. A USBC HUD-approved housing counselor can help you to apply for these programs and learn the rules.
Q. What is the difference between refinancing and a loan modification?
A. Refinancing your loan means finding another lender who will loan you the money to pay off your existing mortgage and enter into a new loan with you. Generally, this option is only available if you have good credit. If you have already missed payments or are in foreclosure, your current lender may agree to a loan modification to help you get back on track. A loan modification may negatively affect your credit, but not as much as a foreclosure.
Q. I stopped paying my mortgage when I lost my job. Now I can afford to make payments again, but my lender refuses to accept them. What can I do?
A. You can ask your lender for a reinstatement of the loan. You must ask your lender for a reinstatement quote, which will include the amount that is past due plus fees and charges. You must make this payment by the deadline your lender will give you – usually two weeks – so that the amount will not go up. Once you pay that amount, you will continue to make the monthly payment required by the original mortgage and note. If you are able to reinstate, any foreclosure action will be dismissed.
Q. I lost my foreclosure case and my home is about to be sold, but I now have enough money to pay off the debt. How can I do that?
A. A payoff means that you pay the entire loan in full plus fees and charges. You can do this at any time up to the sale of the property and this will result in a dismissal of any foreclosure action and full ownership of your home. After the judicial sale, this is called redemption. The homeowner usually has one month to redeem his/her property after the saleis approved by the court.
Q. I lost my foreclosure case and have to move out. Can I get help with moving expenses?
A. If you have received a notice to vacate, or a letter from the bank or property management company about moving out of the property, you can request “Cash for Keys.” This means that you set an agreed-upon date to move out and negotiate how much money the bank will pay when you move out. You cannot get the money before you move because the bank has to make sure that you leave the property in good condition. The “Cash” amount varies for each lender or bank. It could be $1,000 or it could be $3,000. You need to talk to the bank or property management company and negotiate the payment. After you move out, the bank or property management company will inspect the property and pay you the amount that you have agreed to with them. Usually, you must leave a key to the property. The house must be left in “Broom Swept” condition, which means a clean home down to the sweeping. Only normal wear and tear will be acceptable with no signs of vandalism from the homeowner. Appliances and fixtures must be left in the house, unless the bank has agreed that you can take them.There can be no pets left behind or junk in the yard or out buildings.
Q. How soon do I have to move out if I have lost my foreclosure case?
A. Once the sale is approved or your redemption period has passed, you may be notified that you must move out of your house. Sometimes you will receive a three-day notice to vacate the property. If you do not move out on your own, the bank might have to ask the Court for a Writ of Assistance. Sometimes the Writ of Assistance is included in the Judgment and there is not a separate hearing. If the bank applies for a separate Writ of Assistance, you will need to file a response with the Court if you do not want to move out immediately. Once the Court signs the Writ of Assistance, the bank has the legal right to force you to move out of the house. The bank can give the Writ of Assistance to the sheriff and the sheriff can change the locks and take other steps to ensure that you leave the house. Sometimes the bank doesn’t do anything and you can continue to live in the house indefinitely. Sometimes, the bank lets the homeowner stay so that the house is not vacant and subject to vandalism.
Q. Can I appeal if I lose my foreclosure case?
A. If you disagree with the judge’s decision, you can appeal your case. An appeal is complicated. You should talk to a lawyer about how to appeal. You can call the State Bar for help finding a lawyer: 505-797-6066 or 1-800-876-6227. If you are income-qualified, a USBC lawyer may be able to help you for free. An appeal must be filed with the Court of Appeals within 30 days of the final decision of the District Court. During the appeal, you have to post a bond if you want to stay in the house. You have to ask the District Court to set the amount of the bond.
Q. The court ruled in the bank’s favor, and my house is going to be sold. How long does that take?
A. Once the District Court has made its decision, the bank will set a date for the judicial sale of the house. The sale is run by a Special Master who is appointed by the Court. In almost every case the bank is the only bidder and the house is sold to the bank that foreclosed. Usually, the bank pays about 2/3 of the value of the house, leaving about 1/3 still owing. This is called the “deficiency.” Once the sale takes place, the Special Master prepares a report for the judge. The judge must approve the Special Master’s Report. If you have been participating in the court case, you will get a copy of the Special Master’s Report and you will be able to file a response with the Court. If you disagree with the Special Master’s Report, and you file a response, you can also request a hearing to explain to the judge why you disagree. Usually your dispute would be based on the sale price, the charges or other fees included in the Special Master’s Report.
Q. The court ruled in the bank’s favor and my house has now been sold. Is there any chance I could buy it back?
A. Your mortgage gives you the right of redemption. New Mexico law permits up to nine months but most mortgages specify one month. This means that you have one month after the Court signs an order approving the Special Master’s Report to buy your home back from the bank. In order to redeem, you have to pay the bank the amount of the sale price plus fees and charges approved by the judge in the Special Master’s Report. New Mexico law has a procedure in which you file a Petition for Redemption with the Court. You will have to pay the full amount paid at the sale plus interest and charges. This payment must be posted with the Court. Like any other papers filed with the Court, you must give copies of your paperwork to the attorney for the other side of your case.
Q. If I file for bankruptcy can I save my house?
A. If you have a lot of debt, including the money owed on your house, you can file for bankruptcy at any time during the foreclosure process. This will place the foreclosure lawsuit “on hold” until the Bankruptcy Court processes your bankruptcy application. Bankruptcy will give you time to make a payment plan with the bank and make the payments on your house. It may also give you time to apply for a loan modification on your mortgage. You will need to consult with a bankruptcy attorney. You can also purchase a “pro se” (self-help) packet at the bankruptcy court.
You can find out more about bankruptcy at the Consumer Debt Workshops offered by the New Mexico State Bar. Call 505-797- 6094 or toll-free 1-800-876-6227, to find out when a workshop is scheduled near you.