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Friday, October 3, 2008

Prioritizing the Bills--Pay Your Mortgage First

I wish I had come across this list of Top Tips to forestall foreclosure from Laura T. Coffey at MSNBC a few months ago.

Here's her list, with my comments.

1. Face the problem head-on.
No more piling up the bills and refusing to read them.

2. Contact your lender and explain your situation.
The best outcome is that you'll get a loan modification, like we did. The trick is that your mortgage servicer is unlikely to grant a loan modification if you can't show sufficient income to carry the new terms of the loan. So it may not work if you request it, say, if you're still unemployed. But, hey, it couldn't hoit. And if you're talking to them, they know you haven't abandoned the property for a South American hideout.

3. Understand your mortgage rights.
In other words, read your loan.

4. Consider selling your home.

5. Explore the “short sale” or “deed in lieu of foreclosure” options.

These last too are horrible to contemplate, but if you can't afford the house and have no prospects of being able to afford it, they may be your only choices. (I know. I KNOW. This is where it gets tough.) Read the article for how these sales work.

(By the way, this is EVERYWHERE. My daughter's teacher is buying a house closer to the school from a buyer through short sale.)

6. Don’t give your money away to the wrong people.
No matter how little money you have, there are always unscruplous low-lifes willing to help you part with it.

7. Seek out legitimate help.
Find a legitimate debt counselor, perhaps one affiliated with the National Association of Credit Counselors.

8. Set financial priorities that fit your current circumstances.
In other words, pay your mortgage first. The other bills can wait.

9. Consider filing for personal bankruptcy protection.
This is not something we considered. I mean, we borrowed the money, didn't we? We bought the stuff, or paid the taxes, or whatever with the money, right? For some people it may be the only way out, and you may be able to keep your home to boot.

10. Maintain your self-esteem.
Now that's easier said than done, isn't it?

Another suggestion is to pay mortgage payments sporadically, even if you can't afford them monthly. It's when you go 60, 90, 120, or 150 days with no payment or communication that the mortgage company starts to get a little antsy.

Further Reading:
Forestalling Foreclosure by Gerry Willis at CNNmoney.com
suggests trying all the tactics above before raiding the retirement account.

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