Real estate hardship has become much more familiar to a lot of people in the last couple years or so, as the bursting of the housing marketing bubble has pushed home foreclosure rates through the roof (no pun intended). With more and more people dealing with potential real estate hardship, it’s important for you to understand what it is and how you might possibly find relief–that is, if you can qualify for it.
Real estate hardship comes about for a homeowner for two basic reasons: either they have had a sudden diminishing of income, or they have had a sudden increase in expenses without any concurrent increase in income. Either one of these situations can cause a homeowner to suddenly find it difficult to keep up with paying the mortgage.
Decrease in Income
An unexpected or unavoidable drop in income might hit you for a number of reasons. If you run your own business and your business suddenly goes under–maybe you had a bad business partner who got your firm into legal trouble–you will suddenly find yourself without the income you relied on. Of course, another way to lose income is to get laid off. Certain sections of our economy aren’t all that stead right now, and if you work in one of them you could find yourself getting the pink slip with little notice.
Then there’s the typical two-income household. If your spouse gets laid off or becomes disabled, you’ll have less money coming in. In the case of disability, even if your spouse is covered by insurance, there are laws prohibiting people from making 100% of their working income through insurance just as there are with unemployment insurance benefits. And, hey–speaking of insecurity on the job, you may just be forced to take a sudden pay cut if your business finds itself in danger of closing its doors. Not much you can do about that.
Any of those incidences could qualify you as a case of real estate hardship, and you might be able to work with your lender to lower your payment or get refinanced into a better mortgage. But, if you do things to cause your own problems, don’t expect any charity. If you quit your job in disgust…if you do something stupid and easily avoidable to get yourself fired…or if you ARE that bad business partner…you probably should start packing.
Increase in Expenses
An unexpected or unavoidable increase in expenses may also bite you in the heel and cause severe financial problems. Let’s say that you have a case where you were planning, and were told that you could, refinance your balloon mortgage in a couple years when the ballooning started…but when that happens, you find that due to your home value decreasing, you don’t have enough equity to refinance. Now you’ve got a big increase in expenses that you had planned not to have.
Here’s one for ya: your wife is pregnant. You are prepared for that. What you weren’t prepared for are the quadruplets. BIG increase. Let’s say you’re that business owner and with the market forces being what they are you’ve suddenly got considerably higher fuel and supply-stock costs. These can come on rather suddenly and hit your bank account very hard. Or let’s say that, although you have done nothing wrong, someone decides to sue you–this is all too common nowadays. You still will need a legal defense and the case could drag on for months. Lawyers ain’t cheap.
Again, with the above situations you can possibly get help from the lender’s Loss Mitigation or foreclosure avoidance department that deals with cases of real estate hardship. But, again, don’t think you can be irresponsible and cause your own problems and then cry for help. You didn’t NEED to buy that new 17-foot sailboat. You didn’t NEED to buy that Ferrari (you don’t need three cars). And what’s with the gambling habit? Start packing.
Final Note
If you want to try to qualify as a real estate hardship case to save your house–do NOT try to get sympathy from your lender or servicer. They aren’t going to work with you just because they feel sorry for you, because they probably don’t anyway. You need to make a rational case that includes evidence that you will be able to make a quick and full recovery in the near future. Lenders would rather preserve a loan than have to foreclose, but that’s the only reason they will work with you. They’re not monsters, but business is business, and they hear special pleadings daily. Your real estate hardship case needs to be stronger than just an appeal to emotion.
Tags: hardship, hardship letter
May 3rd, 2010 at 10:53 am
What if you are in a real estate related occupation and you are not likely to be able to change your occupation over night.
the bank wants to lower your payment but only by a few hundred dollars
analyzing the situation, even if you stayed in the same occupation and
worked longer hours the amount of expenses double.
Gas prices are up for everyone now again, what a shame when the rates
for mortgages are climbing.
solutions for recovery are not going to be normal for any borrower.
Nor is it going to be a short recovery.
Sometimes a short sale may be the best answer. Rental housing has lowered and landlords are more willing to take less than perfect credit
Action may save your credit and a lot of worry. Still most people want to keep their homes because they worry that recovery won’t come soon enough for them to someday purchase a home again. Of course banks want to see more conservative borrowers, lifestyles need to change, no more eating out on a daily basis, that vacation to europe is out, and now its
not Rodeo Drive where you should shop, Conserve, and price cut is important to do when you want to save your home. Before you make out your expense report go over it with your Realtor, what may sound normal
to you may not be to your lender. Another point is the home itself, are
you doing everything possible to make it sellable for the most money.
Staging Properties @ 805-426-5750 has helped a bunch of people with
there budget for a sale plans. They consult with homeowners on how they can make their home look better on the market to sell fast. They are super at the job and help you save money quickly, and weed out the confusion that comes with moving and starting new. For a few hundred dollars, you can sell your home quicker and for more, plus you learn alot that you take with you on your journey to a new start.