Are You Playing The Mortgage Bail Out Lottery?

Will the government be able to provide you with mortgage relief? Maybe, but maybe not.

Waiting for your mortgage lender or a government program to fix your defaulted mortgage problem or return your equity that was lost by the declining housing market? Will that be a successful strategy? Maybe and maybe not. While there certainly are housing programs out there, and the forty-nine state Attorneys General settlement of certain mortgage claims contains some relief, not everyone will qualify for relief under these programs.

Qualifying for government relief is complex and may hinge on who owns your mortgage

Qualification criteria are complex and a remedy may depend on who owns your mortgage. For instance, the current Bank of America principle reduction program has restrictions based on the owner of the mortgage and the extent and timing of any default by the borrowor. So, some homeowners with defaulted mortgages or underwater mortgages have won the bail out lottery and you did not. But won’t there be more relief on the way? Again, maybe and maybe not.

A bankruptcy lawyer can help if you default on your mortgage, but time is not on your side

What should a homeowner who is in default on their mortgage do? Consult an experienced bankruptcy lawyer now. Here is why:

Time is not on your side. A Chapter 13 Bankruptcy case is a very good alternative to save your home from foreclosure. While a Chapter 13 Plan can not change the terms of your mortgage or reduce the amount of the loan to the value of the house, except under certain limited circumstances discussed in a prior post on the Forum  you can read here, it can restore the original terms of a defaulted mortgage. But Chapter 13 repayment plans have a maximum term of five years. All the mortgage arrears (missed mortgage payments) have to be caught up over the plan while you restart and remain current on your underlying monthly mortgage payments. If your cash flow supports this repayment, including the addition of a monthly fee that is paid to the Chapter 13 Trustee, you can avoid foreclosure and cure your mortgage. As the missed mortgage payments add up, you may not have the cash flow to cure the arrears in sixty months. A longer repayment period is not available under the Bankruptcy Code.

Be proactive about tackling your mortgage arrearages

Tackling mortgage arrears while it is still within your ability to do so is extremely important if you are not in line for a mortgage modification or principle reduction program. Regardless of the news coverage on these remedies, few people have actually been helped by these programs to date. Do not wait until it is to late to solve the problem through a Chapter 13 Bankruptcy filing.