wORKOUT PLANS

In the face of challenging financial times, many homeowners struggle to stay current on their mortgage payments. It has been noted that nearly half of these distressed homeowners never reach out to their lenders or loan servicers when they fall behind. The key to avoiding foreclosure lies in proactive communication and a robust action plan.

If you find yourself missing a mortgage payment, the first point of contact usually tends to be the collections department, primarily tasked with retrieving past due payments. Their scope is limited and they are generally not in a position to offer more than a repayment plan.

For meaningful assistance during a mortgage crisis, reach out to your lender’s loss mitigation department. This is where you will get real help, including possible modifications to your loan terms. However, if you find it nerve-wracking to initiate this dialogue, consider contacting a U.S. Department of Housing and Urban Development (HUD) certified counseling agency. They can help you create an Action Plan, tailored to your unique situation and goals.

1. The first step in your Action Plan is to develop a realistic budget, taking into account all your income and expenses. Ensure to cut unnecessary expenditure and try to boost your income. Your budget should be realistic, portraying what you can actually afford and promising only what can be feasibly accomplished.
2. The next step involves crafting a hardship letter that narrates your past, present, and future situation regarding your mortgage difficulties. Include a detailed account of events leading up to your default, the current predicament, and the assistance you seek from the lender. Emphasize how their help will benefit you in the long term.
3. Once you’ve completed your budget and hardship letter, immediately call your mortgage company and ask for the Loss Mitigation Department and ask for a ‘workout package’. This is an agreement between you and your lender outlining how you will address your mortgage default to avoid foreclosure. Be clear about your needs and limitations while negotiating this package. Maintain professionalism and assertiveness throughout this process.
4. Complete the workout form promptly, retain a copy for your records, and send it back via fax or certified mail along with your hardship letter. Keeping track of all interactions with your lender is essential. 
5. Document every call, letter, and detail of communication, including names and agent identification number, dates and times and phone numbers. I also advise to email a summation of the phone call to yourself after documenting while you were on the phone. Consider maintaining a dedicated notebook for this sole purpose.
6. Lastly, if your lender does not accept partial payments, it’s essential to save what you would have paid to the mortgage lender in a designated savings account. This fund can be used for negotiating a workout package or finding a new place if you are unable to save your house. It’s critical to use this money wisely, prioritizing your home over other debts.