Real Estate Insight

• Beyond the obvious threat of foreclosure, falling behind on a mortgage can be costly: Lenders charge late fees as well as legal and administrative costs, and the borrower’s credit score will suffer. Experts say the sooner a delinquent borrower deals with the situation, the better the chances are of making a full economic recovery.
  
  
• Borrowers who are determined to stay in their home but cannot immediately make back payments need to start by contacting their lender or a credit counselor to discuss available options. Among them are devising a repayment plan, modifying the loan, doing a short sale, and adding what is owed back into the mortgage balance.
  
  
• The first step borrowers should take is to assess their financial situation by looking at the amount of money brought in each month versus what is spent. Many credit and housing counselors have worksheets on their websites to help with this.
  
  
• Next, borrowers should collect pay stubs, documentation on other income, two years’ worth of tax returns, two months of saving and checking account statements, and mortgage records. If the borrower has experienced a hardship, such as a layoff, a divorce, or an illness, they should gather evidence of that, such as unemployment insurance receipts, medical bills, a copy of a doctor’s letter to their employer, or a divorce decree.
  
  
• Finally, borrowers should talk to their lender, servicer, or an adviser. The federal Dept. of Housing and Urban Development certifies counseling agencies that provide free advice and assistance, and has a list of them on its website. Counselors can offer alternatives and prepare a budget to see if the homeowner can afford to stay in the house.
  
  
• Before agreeing to a repayment schedule, it is important homeowners understand how their lender treats partial payments. Some credit partial payments toward the balance immediately, while others hold the money in a “suspend account” until the full amount is received. Some will return the check to the borrower, and some will stop accepting payments after the mortgage is seriously delinquent.