People dealing with financial crisis are often dealing with decisions that affect their home mortgage. Recent weather disasters in Minnesota have left many homeowners with such serious damage to their livelihood and home that they question whether to maintain their present mortgage arrangement. Many are asking, what are the options? One option to consider is a mortgage workout.
A workout is a temporary or permanent change to the terms of your present mortgage. There are many types of workouts including repayment agreements that allow people to "catch up" on payments over time given the situation; loan modifications that reduce monthly payments; as well as arrangements that allow home owners to sell the house in a more advantageous way than going through the foreclosure process.
There is a difference in workouts among lenders – not all lenders will agree to all types of workout proposals. The important task for the home owner is that they find a workout plan that will meet their needs as well as the needs of their lender to create a win-win solution for both sides of the agreement.
An important first step for homeowners is to be aware of what their mortgage lender might already suggest as a workout option. This information is usually available in the mortgage agreement in a section that could be titled "what happens if the loan owner cannot make the payment?" Lenders will usually provide information so that these details can be clarified through contact early in the process. When disaster occurs involving a home mortgage, the lender should be one of the first contacts made by the home owner. If a lender does not have an established workout program, the homeowner might want to contact other sources of help. In Minnesota, an important first contact for help would be the Minnesota Home Ownership Center at www.hocmn.org or toll-free telephone is 866-462-6466.
So how soon should you consider a workout? Most housing professionals will suggest that you consider a workout as early as possible after the occurrence of a crisis. With a mortgage, it will be much easier to negotiate a workout before you get too far behind in payments. Starting early will also show your responsibility to preventing more serious problems that could occur in the future if action is not taken relatively soon. Starting early by making contact to seek possible solutions with the lender may also prevent the lender/mortgage holder from moving your loan account to the foreclosure process.
If you choose the option of a workout, do some preparation. Gather all important information related to the mortgage agreement. Know your own financial situation – presently and hopefully for the future. What kind of workout can you afford? What will you need to do in the short and the long term of the workout? Do you have a present as well as a future household spending plan available for review? A solution will never be successful if you cannot afford it!Another important task is to document all information that describes why you are considering a workout. That information may be more available in the event of a job lay-off than with a weather disaster but do what you can to completely describe your hardship. Complete documentation of the situation will always be the key to moving from a difficult to a more positive direction for the future.
For further information: contact Shirley Anderson Poriscn, University of Minnesota Extension Educator, at 507.337.2812, toll free at 888.241.3261 or contact the Home Ownership Center – Ed Nelson 651.659.9336 x 104 or toll free 866.462.6466.Source: Shirley Anderson-Porisch, University of Minnesota Extension Educator in Family Resource Management, Extension Regional Office, Marshall, 888-241-3261, ander308@umn.edu.
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