Holiday Hangovers

Are your credit cards tired, overworked, and underpaid? Do you suffer from extreme mailbox avoidance syndrome? Indeed, it sounds like a typical case of “Holiday Hangovers”! It’s a common malady associated with the reality of “shop ‘til you drop” overspending resulting from hard-to-resist holiday generosity. Problem is, many look for temporary relief by delaying the largest bill they have; their mortgage payment. Because it’s the biggest, it’s also the hardest to catch up.

It’s important to be forthcoming with your lender when situations get out of hand. While collectors are normally over-aggressive (many get paid for each payment they collect), keep in mind that the lender wants to be sure you do not default.

Missing a Mortgage Payment?

Tell the Collector that you want to speak to the Loss Mitigation (or Home Retention) Department. Their job is to assist borrowers in restructuring debt which helps reduce default rates keeping losses to a minimum. Working with them early on ensures the largest menu of options is available.

Choices could include:

• Rate reduction: reducing your interest rate for the remainder of the mortgage.
• Recasting the Payments: re-computing payments to include any delinquency.
• Extending the term of the loan: allowing delinquent payments to be paid at the end.
• Converting the type loan: reducing payments or allowing a one-time assumption of an otherwise non-assumable loan.

Your willingness to cooperate, coupled with your individual circumstance, will largely dictate your choices. If the situation seems hopeless, options such as a Deed-in-Lieu allow your interest in the property to revert to the lender. This is a complicated option in Hawai`i, however. The property can be sold avoiding an expensive and time-consuming foreclosure proceeding. You may even be able to stay in the home if you list the property as part of a pre-foreclosure sale.

Sales and Taxes

With values at an all-time high, selling is certainly a viable option. When you owe more than the property is worth, which is very rare these days, the lender may actually forgive part of the debt allowing a short-sale to proceed.

Remember, there may be tax or collection consequences which apply to your situation so be sure to consult your tax advisor or legal counsel before considering a short sale or voluntary foreclosure.

So, if you find yourself suffering from a Holiday Hangover, take two aspirin and call the Lender or your REALTOR(R) in the morning. It may be just what the Mortgage Doctor ordered!