The recession officially started December 2007 and ended June of 2009; however, many homeowners struggled to stay current on their mortgage before that time, and some still do now. Those in the financial industry have been learning how to help people either avoid or survive foreclosure of their homes, while at the same time the whole process evolved.
Throughout this recession, there have been several programs and initiatives to help homeowners stay in their homes and avoid foreclosure. Since about 2007 they started out as ways to give incentives to banks for offering loan modifications. The help of banks, credit unions and the Federal government has often been slow, inconsistent and confusing, and although millions have been helped to stay in their homes, several million people still lost their homes in foreclosure. Some people have been helped with lower payments, by making payments, and by obtaining less burdensome arrangements to lower late fees on payments in arrears. Federal money has also been available to help them too.
Since 2009 lenders have staffed up their hardship or modification department, and have been more flexible at helping people either stay in their homes or dispose of them through short-sales or deeds in lieu of foreclosures. These two methods help when the home owner needs to sell or transfer the deed back to the lender, because they have no or negative equity–even a modification isn’t enough or they don’t qualify for one. The peak of people being helped was in 2010, but the percentage of short sales and deeds in lieu of foreclosure increased. In addition, more government cash has been made available within the last year or two. HUD has an updated report of the trends through mid-2012.
What have we learned about helping people:
- Contact your lender and certified HUD counseling agency in your area, and don’t pay anyone for help or you will get ripped off. Keep excellent records of who you speak to, assignments, and copies of everything.
- Don’t give up until it is over, even if you have been turned down for modification or short sale already, and you are still in your home. Lenders, the government and your situation may have changed, so it never hurts to try all over again and again. I have seen people turned down numerous times for short sales, modifications and refinance at lower rate and payment, and later they were granted what they were seeking.
- When it is over, it is not the end of the world. If you have to foreclose, do a short sale or deed in lieu, and move to a rental; it is hard but it is not the end. There are even ‘cash for keys’ programs to help you move and to make rent deposits. After a few years of improving credit, paying off debt and saving money you will recover and end up with a home again- if you want to and it makes financial sense.
- Don’t move unless you are forced to because you have reached the end of the foreclosure process and you get a sheriff sale notice. I have seen many people move out too early and end up worse off in the long run. In the meantime, stay in your home, keep it in good shape, and pay homeowner’s insurance. Try to pay the second mortgage and real estate taxes if you can. Since you will not be paying a mortgage or rent, you may have extra money. Use that to pay off other debts and for necessary things that you couldn’t afford before, such as car repairs or tires- not on vacations and unnecessary things. Housing counselors disagree on accumulating savings versus paying off other debt, so talk to a HUD counselor in your area.
- Learn throughout the process. Even though you may not have brought this upon yourself, perhaps because it was caused by unemployment or an uninsured health problem–still use this experience for character building; also become great at personal finances and take classes such as Dave Ramsey Financial Peace University. When life improves, having learned to be excellent at personal finances and more focused on what is truly important, you will be better positioned to design a plan for your next chapter of life while avoiding some of the same problems.
- You are not your stuff. Hold your head high. Focus on what is really important, such as family, faith, friends, and integrity. Pray throughout the process for help, direction, financial miracles, and wisdom.
Lastly, if you live in one of the severe housing crisis states like Florida or Nevada, there is even more help. Ohio, where I live, is one of the states hit hard by this crisis, and additional monies have been appropriated here. If you live in Ohio, read more about it in a recent Columbus Dispatch article. Your local HUD office will tell you about the latest programs in your state.