by Guest Blogger Anna Cuevas
Whether they are 30 days late or 90 days late, there has been a recent rise in mortgage defaults. The foreclosure rates that temporarily slowed during the government’s initial push toward loan modifications are once again on the rise. Currently, more than seven million American homeowners are in some sort of mortgage default.
The reasons for the high number of defaults cannot be attributed solely to people who purchased homes above their means. On the contrary, the extraordinarily high number of defaults is the result of a longstanding recession and our current economy and the trickle-down effects from them.
The recession has closed businesses, resulting in the loss of jobs. Those who have been able to find alternate employment after being laid off have had to accept jobs which pay 25 to 50 percent less than they were making with their previous employer. Homeowners who oncehad two to three incomes to pay their bills are now struggling to pay the same debt with one income, and in some cases, no income. The jobs which were once available are no longer there.
With the loss of jobs comes the loss of benefits. The employees who have lost jobs have also lost their insurance benefits, and as a result, when they are faced with an illness or injury, are saddled with high out-of-pocket medical bills if they have no insurance. Those who are able to maintain their insurance benefits are strapped with yet another high monthly payment to keep the coverage previously paid by their employer.
The jobless aren’t alone. Those who are employed are also taking pay and benefit cuts, receiving a reduced income and paying more out-of-pocket to keep insurance and other benefits. It’s a sacrifice that they are expected to make in an effort to keep their jobs and help their employers stay in business. Those homeowners, too, are facing the fact that they have less income and more expenses, while still trying to stay current in their mortgage payments.
In addition, the foreclosure crisis and economy have caused a rapid decline in housing values, which in turn causes a loss in home equity, an asset which once increased the credit –worthiness of homeowners. With the decline in home value, comes a loss in the value of the down payment on a home, meaning homeowners who once borrowed 80 percent of their home’s value now owe a significantly higher percentage. Sometimes these homeowners are discouraged to find that they owe more than their house is worth after making years of payments.
Add to the above reasons inflation and the rising cost of food, medical care, utilities, and maintenance, and it’s not so hard to see that the dollar is being stretched further than it was several years ago. Many homeowners who purchased a home within their means five years ago have not received cost of living raises for years, and are now paying more for all their goods and services on the same or less income they made when they purchased their home.
These situations are the ones faced by many of the seven million American homeowners who are currently in default on their mortgage. It’s not reserved solely for low-income families, or even those who borrowed with little or no down payment. It’s a rising epidemic due to a stagnant economy, and one that’s being experienced by people of all incomes, including celebrities and millionaires, who are also experiencing the effects.
There is hope for these seven million homeowners, however. Lenders are often willing to work with homeowners to bring them up to date, and some homeowners are eligible for a loan modification which will recalculate their monthly mortgage payment to one that is affordable based on their current income and circumstances. The key is for all homeowners to talk to their lenders, expressing their intent and desire to keep their homes and work with their banks to bring their payments current and find an option which is acceptable to all parties. Learning more about loan modification programs and the requirements to apply and be approved is one step that many homeowners have not taken advantage of. If you are currently in default, now is the time to take action, before your bank forecloses. Put aside your fears, become educated and take immediate steps to do what you have to do to make sure you are one of the seven million homeowners who were able to save your home. It is possible and it’s not too late.
Anna Cuevas, known as “America’s Loan Modification Guru,” has guided thousands of Americans in keeping their homes from foreclosure. A popular blogger (askaloanmodguru.com andhuffingtonpost.com), Cuevas has been called a “superhero of the loan modification industry” and has been nominated for CNN’s Heroes. She is the #1 bestselling author of SAVE YOUR HOME Without Losing Your Mind or Money.