Worried You'll Fall Behind on Your Mortgage? CCCS Says, "Now's the Time to Get Help!"

Last month Maryland landed in the top 10 on RealtyTrac’s state foreclosure rates list. This confirms the housing crisis is still a big problem for many local residents. For most financially distressed Marylanders, the threat of foreclosure can be summed up in three simple words: “Embarrassed, fearful, and depressed.” Housing counselor Mary Rammel, who works for local nonprofit Consumer Credit Counseling Service of Maryland and Delaware (CCCS), believes these same three words keep people from seeking help. She says, “This can lead to serious consequences, because the longer homeowners wait to take action, the less alternatives they’re likely to have.”

But what can homeowners who are struggling financially do? Rammel recommends, “The first step is to call the lender and ask them what options they have available. Then call a HUD-certified housing counseling agency.”

HUD-certified housing agencies like CCCS are required to provide free foreclosure prevention counseling. Their counselors are trained to help clients evaluate their financial situations and explore possible solutions to their mortgage problems. Rammel, who has 26 years’ experience as a financial and housing counselor, says, “When clients come to us, they receive a full financial review, including a household budget and suggestions on how to reduce their expenses. We also supply them with referrals to other agencies who may be of help. Most importantly, we help them develop a concrete plan of action. They leave knowing which options are open to them, so they can make an informed decision on how to proceed.”

The strategies that are available to homeowners with mortgage concerns roughly fall into two categories: 1) those that make it possible for them to keep their homes and 2) those that allow them to leave their homes without going through foreclosure.

Ways to Keep Your Home

Many factors affect which options are available when financially struggling homeowners want to stay in their homes. For example, the type of mortgage and amount of equity owners have built, the amount they are behind on their mortgages, and the amount of financial hardship they’ve endured may all have an impact on the options for which they qualify. Loan and lender policies and procedures also play a vital role, because any option must be approved by the company holding the mortgage.

Here is a list of the options Rammel says may be available to qualifying owners who hope to remain in their homes:

Modification: The terms of the mortgage are adjusted to help the borrower.

Repayment: Payments are adjusted to “catch up” the mortgage based on the homeowner’s income.

Forbearance: Mortgage payments are reduced or stopped for a period to help a homeowner deal with an economic setback, such as unemployment.

Reinstatement: Homeowners use their own funds (i.e., inheritance, tax refund) to bring their mortgage payments current.

Bankruptcy: Chapter 7 or 13 bankruptcy may make it possible for owners to keep their homes. However, these options remain on owners’ credit reports for seven-to-10 years, and may therefore negatively affect their credit scores for years to come.

Ways to Avoid Foreclosure When Leaving a Home

Rammel says many homeowners go to drastic measures to keep their homes. Unfortunately, this course of action may yield disastrous results. She explains, “People sometimes borrow from family or friends, borrow from their 401Ks, IRAs, or pension funds, and still come up short. If this happens, they may ultimately lose their homes AND their financial assets.”

Given this grim scenario, cash-poor owners are often tempted to walk away and let the bank take their homes via foreclosure. However, this isn’t a wise strategy, because foreclosure typically stays on consumers’ credit reports for seven years and may lower their credit score by 250-280 points.

When owners can’t afford their homes, Rammel recommends they consider these options instead of foreclosure:

Short sale: The lender allows the owner to sell the home him/herself and sometimes for less than the amount it would take to pay off the mortgage.

Deed in lieu of foreclosure: The lender agrees to take back the property without foreclosing on the owner.

Rammel emphasizes homeowners need to talk with their lenders to find out which mortgage options apply to them. She adds, “Here at CCCS, we can also help you take a look at what’s available and how each option works.”

To find out more about CCCS of Maryland and Delaware’s free, confidential foreclosure prevention counseling, please call 1-866-731-8486. The agency also has a free, self-paced “Preventing Foreclosure” course on its website. It examines mortgage relief options and how to avoid falling victim to foreclosure prevention scams. In closing Rammel offers these words of advice: “Don’t wait to get help! The sooner you reach out, the better chance you’ll have to come up with the best strategy for you!”

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Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. CCCS MD State License #14-01