By FPA member Eric S. Toya, CFP®
Last Updated: April 5, 2010
Just a few years ago, terms like short sale, loan modification or credit crunch were unfamiliar to most. Today, those terms are as recognized as words like staycation or tweet-up. According to Kiplinger.com, 2.4 million Americans are expected to lose their homes by the end of this year. That represents a five-fold increase in the annual numbers from a decade ago1. CNNMoney.com reports that "11.3 million homeowners — or 24 percent of all homes with mortgages — were underwater as of the end of 20092."
If you are among the millions at risk of losing your house, what should you do? To be sure, the amount of information available can be overwhelming, even contradicting. Couple that with the fact that this can be a frightening, emotionally taxing period and it is not surprising that many borrowers who find themselves underwater on their mortgage or in danger of default do not do anything until it may be too late.
"Get into a dialog with your financial adviser and mortgage professional sooner rather than later," said FPA member Becky Rhodes, CFP®, MBA, of RPM Mortgage in Manhattan Beach, Calif. "It's hard for us to dispassionately resolve this type of problem without professional advice."
But how do you decide whom you can trust for advice? After all, you probably began the loan with a mortgage broker, based on what you believed was sound, professional advice.
The good news is that the Federal and local governments have made it a priority to assist borrowers who are at risk of foreclosure or are underwater on their mortgage. As a result, there are a number of programs and resources that may be helpful to you.
The U.S. Department of Housing and Urban Development (HUD) offers a list of approved Housing Counselors. To find one near you, call (800) 569-4287. Counselors are available regardless of what stage of the process you are in. In fact, even if you have not yet missed a payment, but fear that you may be in danger of doing so, it is not too early to talk to a Housing Counselor.
Resulting from the February 2009 Financial Stability Plan, "Making Home Affordable" is a program developed to help struggling homeowners get relief and avoid foreclosure. For more information visit MakingHomeAffordable.gov, where you can connect with free HUD approved counseling organizations, locate free events in your area, find the application documents necessary to apply for the Making Home Affordable program, and find answers to frequently asked questions.
Most importantly, do not try to go through this process alone. According to Rhodes, "it goes back to the old adage, 'any lawyer who files their own lawsuit has a fool for a client.'" In other words, even if you are a professional, you should not try to represent yourself. That advice is even more applicable if you are not a professional.
FPA member Eric S. Toya, CFP®, is Vice President of Wealth Management for Trovena, LLC in Redondo Beach, Calif. He graduated from the University of Southern California with a BS in Finance and Accounting. Eric has been quoted in national publications, including the Wall Street Journal, Money Magazine and the Los Angeles Times.
1 http://kiplinger.com/infographics/mortgage_delinquency/map.html
2 http://money.cnn.com/2010/02/23/real_estate/underwater_rates_rise/index.htm
