We Are Out of Cash And Behind on the Mortgage. – Mike

“Dear Steve,

I am delaying the inevitable but soon must address my circumstances head on. My cash reserve has emptied and now must face what I’ve delayed for peace of mind the last year or so.

I am slightly negative on 1st mortgage. I am extremely negative on equity line of credit and see no way to continue payments indefinitely. What happens if I stop paying on it. I’ve been advised this is the only way the mortgage servicer will negotiate w/ me on this type of loan. Can they foreclose on the home if I stay current on 1st? Is there any Loan modification servicer or Lawyer you trust to refer?


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Dear Mike,

Yes, the time has come to deal with this situation. Being out of cash is a great motivator to finally take action.

Unfortunately, I also think the time has passed to hope for a quick loan modification. With most loan modifications taking up to a year to complete and only about one in five being approved for a permanent loan modification, counting on a loan mod alone is a long odds gamble.

The question you need to face first is what is your plan is you default on the loan and hope for a loan modification and it does not come through? Are you prepared to lose the home to foreclosure? And if so would it be better to hand the house back now, find an affordable rental and start moving forward with your life now rather than living in stress and uncertainty for the next six months?

As far as paying someone to help you with a loan modification, I think you are better off contacting your bank directly. The bank already knows the guidelines of who will and won’t be approved. You don’t need to pay someone else to find that information out. You can always contact a HUD Housing Counselor for free help and advice as well.

See also  Mortgage Loan Modification Profiles: In Trial Limbo

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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