Observations of a Loss Mitigation Consultant

I think that the most important thing for people who are financially
stressed to learn is what their real options are when faced with some
very tough decisions.  Fortunately, information these days flows
relatively freely on the internet.  If anyone wants to research a
subject matter they will likely succeed in being able to collect a lot
of information on just about any subject.  Including, loss mitigation
(ie. loan modifications, short sales, deed in lieu of foreclosure,
etc.)  Unfortunately, what they may not be able to obtain is
perspective.

What I mean by perspective is that unless you are involved in this
area and have real estate (legal, financing and sales) and perhaps even
an accounting background, there are many gaps in the information you may
be obtaining.  Not to mention that, everyone’s circumstances are
different.

I would like to share with you an example that I see all of the
time.  Let’s assume that you lost your job.  Now this reality is
affecting many people in the country, and particularly here in
Michigan.  It may seem quite reasonable to most of us that the bank may
be willing to provide me with some relief until I can find a new job. 
My intention is to find that job within approximately 6 months.  So, I
apply to my bank for a loan modification not understanding that I will
in no way qualify.  Why?  Because I haven’t got a job and the bank will
not consider me for a loan modification unless I am employed.  So, won’t
they tell me this?  Not likely.  The climate at the bank is that there
are so many people applying for the same kind of help as you are, that
the banks are inundated with these requests.

As I continue diligently with my search for new employment, I will
use the savings that I set aside recognizing that I might  lose my job,
to get me through the next several months as I work with the bank.  
This way, I don’t disrupt my credit.  Six months lapse and now I still
don’t have a job, nor do I have my savings.   But, I have great credit. 
Now what to do?

I am sure that you get the picture.  I would have advised this person
to consider not paying the mortgage and asking the bank for some type
of forbearance.  Forbearance allows that borrower to make either no
payment or a reduced payment for a period of time.  Yes, it negatively
impacts your credit.  However, that should not be one’s primary
concern.  Now if six months has passed, as you try to search for new
employment, you still have some money in the bank.  At this juncture,
you may still need to come up with a new solution.  However, at least
you have some money in the bank to carry you forward.

The only solution you have at this time either way would be to sell
your home.  If you owe more than the home is worth, you would need to
ask your bank to approve you for a short sale.  This may be
accomplished.  However, this is where you should engage an expert to
guide you through the process.  Of course, had you asked for help early
on in the process (when you lost your job) I could have been guiding you
early on and you would be in a much better place.

Many people have the best intentions and don’t know that they don’t
know.  Unless this is what you deal with on a daily basis there is no
way you can know.  To me the most important lessons can be learned early
on and big mistakes can be avoided.  Just call me to discuss.  The call
is free and the help may be priceless…