You can't make your house payment. What are you going to do?

This is a tough economy. Some of us are making it through, some of us not. In the beginning of what we are now calling the "bubble burst", mortgage defaults were said to be primarily the result of adjusted interest rates increasing payments to the extent that homeowners could not afford them. Some borrowers didn't realize how the adjustable rates would affect them, others just thought they'd be in a better place when the increases kicked in. As the economy worsened, job losses took hold of  those borrowers who, up to that point, were managing to get by. As the decline continued, a lot of us had trouble "treading water".

Foreclosures were swift in the beginning - say 2008. As the numbers increased, let's face it, the banks simply couldn't keep up. It is not uncommon to hear of a homeowner who hasn't made a payment for a year or more. As government sanctions and programs change or new ones are introduced, the banks are not so quick to pull the trigger.  The bank's hesitation is your opportunity to create an exit strategy. Think about these ideas:

1. If you haven't opened a dialog with your lender regarding loan modification, why are you waiting? The problem is not going away. When my office gets a bank listing and I do the research, I am amazed to find that about 50% of the time, the homeowner didn't try to sell or make any movements to avoid foreclosure. The result is that they lost their home and it may take years before their credit recovers. Bad credit affects your ability to rent a home, to get a job...or buy another home.

2. If you have attempted a loan modification and it didn't work out, try again. Bank's are known to change policies quickly. What didn't work this month may work next month.

3. If a reduction in income makes you ineligible for a loan modification, list the home at market price. The bank will either accept this as a short sale - less costly for the bank - or go for full blown foreclosure - more costly for the bank and usually netting the same result, price-wise. The big difference is, with a short sale you have some control over what happens to your life. And though your credit gets beaten up a bit, recovery is easier. This is not going to cost you anything, by the way. The bank pays the real estate commissions and closing costs. It is a virtually painless exit strategy.

4. Once you have an offer for your home and providing you are eligible on the income front, ask the bank to consider modifying the loan - for you - at market price. This works. It's a bummer for the person who wrote the offer to buy your home but hey, we're in survival mode here.  What you have done is prove with the offer what the home is worth and challenged the bank to step up to the plate - for you. Did I tell you this works? I know - I did it.

5. If none of these tips work for your situation - and granted, "situations" vary substantially -  you can still do the short sale and move on with your life. In a couple of years, provided you've kept your other credit in check, you can buy again.

6.  As with any market, many solutions present themselves but one has to be careful. You'll want to discuss new options with qualified individuals - your Realtor, mortgage company or attorney. The latest solution that I think is viable comes from  investor groups that buy non-performing loans and re-writes them. Income qualifying is a big part of the scenario, credit is not a large issue. The loan is bought at market price. Interest rates are typically higher than market. The bottom line, though, is that you get to keep your home. This solution is not for everyone. But it works.

There is a contingent of homeowners that are just bummed that the market has declined. Some feel as if they deserve a modification because "everybody's doing it". They have the ability to make their payments and have petitioned the banks for loan modifications.  Let me be clear about my experience with loan modifications: successful modifications involve borrowers with a hardship. A decline in value is not in itself a hardship (that comes into play when other hardship criterion are met). Not having enough money to go to the beauty shop or on a great vacation is not a hardship. Having more than one home and trying to modify one of the mortgages is not typically viewed as a hardship. Attempting to subsist on less income due to job loss, injury or illness is a hardship and if you ask nicely, your bank will work with you. I believe the low point is the past and prices are holding...for now. It's a good time to explore your options.

I have several strategies for how to best navigate the maze called today's market opportunities.  Call me if you need my assistance. 562-572-9870