In the current market, there are no good solutions for homeowners that are in a financial crisis, need to sell or need to refinance.
We routinely get emails from our readers that are typical of the following letter:
My mortgage is past due by 2 months because of medical problems that prevent me from working. I’m also deep in debt with credit cards and loans. I have applied with mortgage holders for the HARP Program but was told that it could take six months or more and there were no guarantees they will give me a refinancing. What should I do?
In turn, we recently received a call from a television news reporter asking if there was anything in the horizon to report on that could give homeowners comfort that their short sales or refinancings would become easier.
The short answer to that question is that no good solutions appear on the horizon that can be relied on by homeowners that are in a financial crisis, need to sell or need to refinance.
While the real estate market gets better, we may not see the same level of appreciation and activity in the overall real estate market in our lifetimes. Some markets will be like the boom years during the last decade, but for the vast majority of the country, it will take quite some time to recover from the real estate bubble and bust.
Especially for homeowners that are facing medical issues and other financial problems, the current loan programs don’t seem to help much. If you want to keep your home but have stopped making your payments, it may be quite difficult or near impossible to ever catch up. Some of those homeowners have come to that realization and have moved on. Either they sell their homes in a short sale or have abandoned their properties. Neither of those options helps the neighborhoods those homes are located in.
As we continue to move through the real estate crisis, each homeowner facing his or her own problems must make a determination whether staying in that property they have come to call home is the right place for them to stay.
This reader has stopped paying on the mortgage. Her mortgage payments and level of debt caused by her medical hardship may never allow her to live a normal financial life again. Once a person sustains a medical problem that results in credit card debt at fourteen, eighteen or twenty four percent interest, it’s hard to catch up. The interest costs probably accumulate faster than the person’s ability to earn money. It becomes a financial spiral that could end up in the loss of the home and bankruptcy.
She can certainly try to refinance the loan through the Home Affordable Refinance Program (HARP), but the missed payments will probably be added to the loan amount. She has stopped making all of her payments and while she might be using those home payments to pay down her medical debts, for many of our readers, we have seen that they use their mortgage payments to pay for their living expenses.
Our reader should probably sit down with a credit counseling service (a reputable not-for-profit one) that will help her for free. She and the counselor should go over what she makes, what her debts are costing her and where she spends her money.
Once a homeowner has a better understanding of the money that comes into a household and where the money goes, that homeowner can decide whether renting a lower monthly cost home might be a better solution than the expenses of a home. The homeowner can also see if they are allocating their spending in the right places.
We have seen people pay off low interest credit cards when those same borrowers should be using every dollar they can to reduce their high interest credit card bills.
And as a final note, many in our country are still feeling the effects of the financial and housing crisis. For these people, it does not appear there are any government plans with a silver bullet to help them out. Over the last three or so years, the plans rolled out have given a false sense of hope to homeowners that one plan or another would help millions of homeowners. However, those optimistic numbers never materialized.
It seems that when it comes to the real estate bubble, each homeowner is out for himself or herself to weather the storm. While the interest in the self does hurt communities through declining values and vacancies, it does not appear that the government will truly come to the rescue of homeowners.
Unfortunately, our answer to that television reporter was that the future does not look bright for government sponsored help for struggling homeowners.
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