Yesterday Mark and I attended a clinic on the subject of foreclosures and options, in preparation for the Loan Modification Assistance Workshop we plan on hosting in February. The clinic was provided by Legal Services of Northern California at 541 Normal Street in Chico. A young attorney gave his thoughts on the subject and answered numerous questions. Besides Mark and I there was a young couple concerned about the future of their home investment and a single contractor/homeowner whose income from construction work had tapered off sharply forcing him to make partial payments on his mortgage. The information and answers provided ranged from eye-opening to shocking!
The presentation and discussion generally dealt with two areas of interest: loan modifications and foreclosure. The information on loan modifications was helpful but also equal parts encouraging and discouraging: Encouraging was the fact that the federal government has designed a very ‘well-intentioned’ plan to encourage lenders to modify the loans of distressed homeowners, the Making Home Affordable program. This program has a ‘user-friendly’ website and by all appearances gives hope that one may, without too much hassle, be able to obtain a loan modification. Discouraging was how poorly prepared the banks are to implement the plan, and stories abounded of endless phone calls, run-arounds and dropped calls! The advice provided for those deciding that loan modification is their preferred option is to call daily, stay on the phone, ask for a supervisor and don’t give up!
The more surprising advice however was that troubled homeowners should consider the sacrifices they are making in their lives – retirement savings, kids college funds, family time, etc.; to decide whether or not trying to keep their home is really the right thing to do! Questions were raised and discussed regarding the wisdom of ‘throwing money’ at a home that is worth $100,000 less than the loan on it – when other investments might actually improve the financial position of the borrower. The questions of whether it was ‘moral’ to walk away from an obligation and the impacts of a foreclosure on neighboring properties were dismissed as misplaced, and the emphasis on being true to ones own financial self-interest were deemed a more moral choice. Banks were demonized as uncaring, faceless corporations, interested only in their own profitability.
The take-away message from the clinic was that distressed homeowners must ask themselves one big question: Do I really want (love) this home? If the answer is yes, and keeping the home is a higher priority than other things that might have to be sacrificed to keep it, than attempt a loan modification to ease the burden in these challenging times. If however the answer is no, the advice given was to “stop making the payments, invest the saved money in other things, do not leave the house until you absolutely have to, let the bank foreclose and get on with your life”!
The presentation and discussion generally dealt with two areas of interest: loan modifications and foreclosure. The information on loan modifications was helpful but also equal parts encouraging and discouraging: Encouraging was the fact that the federal government has designed a very ‘well-intentioned’ plan to encourage lenders to modify the loans of distressed homeowners, the Making Home Affordable program. This program has a ‘user-friendly’ website and by all appearances gives hope that one may, without too much hassle, be able to obtain a loan modification. Discouraging was how poorly prepared the banks are to implement the plan, and stories abounded of endless phone calls, run-arounds and dropped calls! The advice provided for those deciding that loan modification is their preferred option is to call daily, stay on the phone, ask for a supervisor and don’t give up!
The more surprising advice however was that troubled homeowners should consider the sacrifices they are making in their lives – retirement savings, kids college funds, family time, etc.; to decide whether or not trying to keep their home is really the right thing to do! Questions were raised and discussed regarding the wisdom of ‘throwing money’ at a home that is worth $100,000 less than the loan on it – when other investments might actually improve the financial position of the borrower. The questions of whether it was ‘moral’ to walk away from an obligation and the impacts of a foreclosure on neighboring properties were dismissed as misplaced, and the emphasis on being true to ones own financial self-interest were deemed a more moral choice. Banks were demonized as uncaring, faceless corporations, interested only in their own profitability.
The take-away message from the clinic was that distressed homeowners must ask themselves one big question: Do I really want (love) this home? If the answer is yes, and keeping the home is a higher priority than other things that might have to be sacrificed to keep it, than attempt a loan modification to ease the burden in these challenging times. If however the answer is no, the advice given was to “stop making the payments, invest the saved money in other things, do not leave the house until you absolutely have to, let the bank foreclose and get on with your life”!
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