Monday, March 23rd, 2009
One of the more common fears among homeowners facing foreclosure is that the bank will suddenly start garnishing their wages in order to pay back the loan. With how far behind some homeowners fall, this fear can result in the anticipation of their not having enough money to pay the bills, keep the lights on, or feed their children. Especially if the income situation has deteriorated quite a bit, there may just not be enough money to pay the mortgage at this point.
However, the good news is that banks can not garnish a homeowner’s wages during the foreclosure process. The very simple reason for this is that the real estate is collateral for the loan — no other assets or future income source is pledged. If a car loan goes into default, the car is repossessed first; same with a mortgage in default: the bank can only take back the collateral that is pledged on the loan and there is no recourse to any other asset or income source.
Thus, the bank will have to take the property all the way through the foreclosure and have the court order it to be sold at a county sheriff sale. This auction is the legal mechanism by which the bank is allowed to attempt to recover the amount it is owed on the loan. If the sheriff sale pays off the mortgage in full, there is nothing further to collect.
If the property does not sell for enough to pay the loan off completely, some states allow mortgage companies to sue for a deficiency judgment after the foreclosure. Again, not all states allow this under the foreclosure laws, but it would give banks the right to garnish wages after the foreclosure, if they decide to sue for the judgment. But again, this comes only after the sheriff sale, and there would be no wage garnishment during the foreclosure process itself.
Banks rarely, if ever, sue former clients for deficiency judgments, though, because they know foreclosure victims do not have a lot of extra cash to pay down another judgment after losing their homes. It would take the bank too much time and money to sue again, when they did not collect very much on their original foreclosure lawsuit.
Lenders, of course, do nothing to dissuade homeowners from having the fear of wage garnishment. In fact, being sued after foreclosure, and the threat of losing their job, income, or other assets is often used by customer service representatives of mortgage companies to compel homeowners to keep making payments, even if they can not afford to do so. But foreclosure victims do not have to fear that the bank will come after their income during the foreclosure, and will not have to worry about the possibility even after losing the home.
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Tuesday, March 10th, 2009
If you are falling behind on your mortgage payments, do not hide from your lender. Instead, reach out to them for assistance. Your mortgage company would rather work with you than commence foreclosure proceedings, which can be quite costly for them.
Negotiating a Loan Modification
Step1
Make sure to know the state of your finances before contacting your lender. Determine how much income you’re bringing in each month, how much you’re paying in bills and where you can cut costs. Ask a nonprofit counseling service to help you put together this financial analysis for free. The counselor will also help to negotiate with your lender. Consumer Credit Counseling is a good place to start.
Step2
Next, contact your lender and have an idea what you need. Tell them what your situation is and what you can offer to help your situation.
Step3
Come up with some kind of an answer to the lender’s question of how you propose to pay off the loan eventually. You’re better off submitting an initial proposal. At least you’ve opened the door in the negotiation
Step4
If you think that your financial strain won’t last long, ask the lender for forbearance, or postponement of payments, for a couple of months until your finances recover.
Step5
If you have an adjustable rate mortgage that reset and you cannot meet the higher monthly payments, request a loan modification from the lender. They will request a complete financial history from you, detailing your income and monthly expenses. Ideally, you should have some cushion in your income to justify a loan modification, if they switched your mortgage to a fixed-rate mortgage. Show them that you can comfortably pay a fixed rate mortgage through extra income from a second job, and you are more likely to get a modification.
- If you are strapped for cash, find a part-time job;
- Call your lender as soon as you discover you will experience some hardship in making your monthly payments.
- Once you have received a modification, make your payments on time to improve your credit.
- If your credit is shaky, do some rebuilding before you refinance your loan.
- If your loan is modified, your interest rate may be a little higher due to your shaky credit.
Posted in Generate income, Informational, Personal debt | 2 Comments »
Friday, April 25th, 2008
Well during my downtime (laid off) I’ve been contemplating paying off 2 bills or keeping my cash stash for a raindy day.
If you’ve read my initial blog entry “My RDL introduction - Financial breakdown” you’re aware of my 2 debts I’ve been wanting to pay off.
Nebraska Furniture Mart (Wife just HAD to have a new washer & dryer set) and my (investment in myself) student loan. Those debts totaled $5500.
With the help of my budgeting program I’m now going to pay those 2 bills off IN FULL by May 30th of this year. If I get my stimulus check ($2100) early, I will be able to pay them off earlier than that.
Paying off those 2 bills will leave us with 3 debts left. My Wife’s student loan ($30K) Our mortgage ($97K) & our rental mortgage ($57K). This will also allow us to save $280/month which was going towards paying those 2 bills off.
My next hurdle will be to payoff the wifes student loan which will allow us to save $288/month. It’s a long hurdle but I think it’s attainable within 2 years. I’m reaching for a goal of end of ‘09. Realistically I’m thinking middle of ‘09
YEAH ME!
Posted in Generate income, Informational, Inspirational, Personal debt, education, goals, success | 1 Comment »
