I've been working on a great post that you all will love! Pictures! Humorous commentary--it's all there, but for later. Right now, I wanted to share yet another article on foreclosures on MSNBC.com: http://www.msnbc.msn.com/id/21098586/ It overstate the obvious, as you can tell from the title, "Facing Foreclosure? Fight is Better than Flight." It gives a basic overview of the cause of this market and what you should do to avoid foreclosure. No offense to the journalist, who, I'm sure, is very talented, but it's written for first graders. Here are some excerpts:
"Sadly, many could escape this fate if they’d just talk to their lenders. Instead, they hunker down and hope against hope that something will happen before the mortgage company takes the home." Now, I find this hard to believe, but if they say so, OK. I told you that I would be sharing everything that happened to us. I find it boring to start at the beginning and tell a story. As you know, the most popular writing technique is called "in media res," and is Latin for "in the midst of things." Most stories that you read start in the middle of the action. I will need to do this without being confusing, so, if something I say doesn't make sense, please let me know.
OK, about not letting your lender know that you are in financial trouble--we knew that we could not float the apartments and our own expenses past August of this year. We had been trying to sell the apartments for over a year, but refused offers that now seem reasonable because we wanted at least what we paid for each property (or because we were greedy--choose one). It was July and the person who ended up buying AV had just pulled out (she came back later with a lower offer and we sold). We knew that we would not be able to make a mortgage payment on our personal residence in September. I called my brother and told him that I was going to ask the mortgage company to allow us to skip a payment, but my brother said that I shouldn't do it until I absolutely had to. (To my siblings' credit, each one offered to lend us money, which we never had to do.) He was worried that skipping a payment would adversely affect our credit rating. It all worked out because, through the grace of God (this was a real miracle that I will outline in a later post), we closed AV on Aug. 31.
As an aside, our PM's on each property, one in OH and one in KY, did not know each other. Yet, at the end of July, both informed me that they would not be making the August mortgage payments due to money that we owed them for expenses. Gee, if they had only collected the rent from the people living on our properties, they would have had money to spare!! That was a sure sign to us for sell and to sell for anything, if we could recoup just a fraction of what we spent. We didn't want to face three properties going into foreclosure.
"It’s almost always better to avoid foreclosure. Foreclosure can ruin your credit rating. . . " No duh!
"First, look for any way to trim expenses so you can make your payments. . . . Take shorter showers and eat more meatless meals, reduce gas costs by planning errands more efficiently. ...Next, look for ways to increase income. Can you or someone else in the family get another full- or part-time job? Will local ordinances allow you to take in a boarder?"--You have got to be kidding me! Yes, my 10 year old can get a job, but he's too lazy.
"Then look for things to sell to raise money — the second car, jewelry, sports equipment, furniture and other things in storage. Have a garage sale or use eBay or craigslist.com." I guarantee you that a garage sale would not have come close to earning me enough to pay my mortgage, which is not a big payment. However, if we foreclosed, I'd have less to move and, therefore, would save money by renting a smaller moving van.
"Keep in mind that the lender does not want your home." Now this is true. Assets of this kind are a liability to a lender. They are in the business of lending, not property management.
". . .(T)he lender might agree to permanently change your loan terms by reducing the interest rate . . ." Right. All I need to do is pick up the phone and say, "Yes, my interest rate is too high for me to make the payments now, could you please change the mortgage note that I signed and reduce it to something more reasonable . . .Oh, you can! Thanks, I'll be calling in six months with the same request. Have a nice day!" If any of you out there have been successful in negotiating a lower rate directly with the lender, please tell me about your experience.
"If your loan is insured by an agency such as the Federal Housing Administration, you might even be eligible for a one-time interest-free loan to cover late payments." So, the best way to get out of debt is to borrow money?
I'll post again later!