What Options Do I Have When I Can't Pay My Mortgage?

Foreign this is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for panties on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now here's your host CEO of We Close Nodes, Scott Carson. Hey everybody, Scott Carson here. Just want to say thank you again for listening to the podcast. If you've been listening for a while, you're subscribed to the podcast. First of all, thank you. Second of all, hey, you know, if you're you're not one of our coaching students or you haven't signed up for one of our three day workshops, here's an opportunity for you. You want to check out our WCN membership. This is the biggest bang for the buck of the notice street. 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We're here to help you. So how do you get signed up for that? Really easy. Just go to noteumbrella.com that's noteumbrella.com get signed up there for you 97amonth guys. Like I said, biggest bang for the buck of the nursery and we want seeds of the family. So let's get you signed up today. That's knownumbrella.com welcome to the no family everybody and thank you for always for listening. Good morning, good afternoon and good evening everybody. Welcome to this episode of the Note Closure show and today's episode. I want to Take it from the perspective of a borrower, somebody who owns a house, has a mortgage, but they can't pay their mortgage. And I want to share with you the different opportunities and different things that you can do. If you're a homeowner who finds themselves in financial trouble and can't pay your mortgage, what options are available to you? What should you do, what should you not do to make sure you come out with the best possible solution for you? And as a lender, while I'm not a license originator, me owning loans and being a previous mortgage broker and a mortgage banker and working for a major bank in the past, but also owning and working with a lot of distressed borrowers over the last 17 years, I can give you some great solutions and answers and, and educate you on what your opportunities are, what you can can't do. Whereas not necessarily calling your bank and calling a major bank, they're going to give you all the options that are available to you. They might give you what's just best for them. So that's where I wanted to go with this episode. And the first thing is, if you are in a house and I don't care if you're upside down, which means you owe more than a house is worth or you've got a ton of equity, when you start facing financial difficulties and it starts to come down, do I pay my mortgage or I pay the electric bill? Do I put gas in my car? You're better off communicating to the bank immediately. Reach out to the lender and tell them what's going on because communication is key and often lenders will be a lot more, you know, willing to work with you if they know that you're communicating with them, if you're telling them what's really going on now, don't lie to them. Don't tell them your grandma died and you've done this before because we keep track of that. There are servicing notes in the mortgages so we see who somebody you've talked to before. So trying to lie about something is not a good thing. But like if you've lost your job or death of a loved one, okay, banks do not want to foreclose on somebody who's just lost a loved one. That does not. That's just not a good thing. They have a heart, but there's a certain amount of time they're often to give you something. If you lose your job, the bank may give you 30, 60, 90 days to overcome that hardship. They may just do a quick forbearance agreement or A lot of put you on a payment plan, depending on what, what happens, you've got to communicate with your loan. Now here's the thing, if you're on time with your loan, the bank has no motivation to modify your loan, do a payment plan or anything. Okay? So you have to take in consideration do I skip a payment to get a payment plan or do I just keep paying on time? Because you're going to have a very adverse effect to your credit score. Your FICO score is going to take a hit if you don't make a payment and they reported the credit bureaus. So you have to think about yourself. If you have laid off and you think you'll be back to work, you know, you might play that 30 day game and want to make a 30 day, hey, your mortgage is due by the 1st, maybe you wait till the end 30th to make the quick mortgage payment so you're not a full month behind or the 29th. You know, lenders are gonna start reaching out to you pretty aggressively. Once you get more than seven days late, you're gonna start having phone calls, certified letters, you're the mailman's gonna be dropping by, knocking off to get you signed on a certified letter, stuff like that. As long as you don't get beyond maybe a 30 day running late, but you don't fall beyond that 30 days. You can play that game a little bit, buy a little bit of time. Okay? Most people did not, don't know that if you aren't able to make your mortgage payment, like I said, it's good to call and say, hey, I'm going to miss a payment because I've lost my job or sick, I've been out of work, you know, or whatever happened, I got, I got sick. Especially right now if you're sick with COVID you're out of work. That's like a I won't say get out of jail card. But many banks are willing to, many lenders willing to work with you and give you forbearance for a period of time. Like, oh, you're sick, out of work. Okay, well, well just, you know, can you make up, can you make a little bit extra next month and get caught back up. That's what I'm willing to do. And when I get a borrower that calls me up, said, hey, I've been out of work, I can't make any payments this month, but I'll be back to work, then I'm just gonna say, okay, we'll just take your payment and Just start paying. If it's 500, pay a hundred dollars extra next month and we'll be caught up in five months. You'll be paid, you know, back to normal. It's totally normal. Okay? If you want, if you get a higher interest rate on your loan, okay, maybe you're in a contract for deed or a higher interest rate because everything going on, the bank's not going to modify and reduce your interest rate down to something that you would not be able to qualify for. Now here's the thing. If you were non performing or weren't paying your mortgage beforehand, your mortgage was sold to somebody else, that new lender might be willing to modify your loan. If you'll come to the table and bring some skin in the game, some payments and aren't, aren't going to ask anything that's absurd. Like I wouldn't say, you know, say I want a 2% interest rate. Well, interest rates right now are at 6 and 7. You're not going to get that. All right, but maybe you can get a five, maybe you can get a six if you bring a chunk of money to the table. All right, let's say you can't make any payments. Here's what you should do. You reach out to, you have any family members that can help you out? There are a lot of organizations, local organizations, church groups, non profits that may be willing, even city organizations that may have some sort of funding in place for 90 days or for a month to help cover your mortgage payment. So I would reach out to your church, I would reach out to, you know, do call the city. Sometimes there are organizations or big groups that will make a mortgage but say, hey, I'm having a trouble time making my mortgage payment or making rent this month. Do you know of any company out there or any group out there? It's helping people avoid, you know, avoid foreclosure. Now here in Texas, it's a fast foreclosure process. You fall behind 90 days, you, you may face foreclosure pretty fast. And that's why you need to communicate. Because the more you communicate and the more you're on top of it, that bank, that lender, that loss mitigation expert is willing to work with you. Okay? Now if you've fallen behind by a while and you're trying to modify, you can't, you know, banks usually want you to bring the full amount due to the table. Who has 6 months or 12 months of payments if you've been behind. Most people don't, but they may be willing to do some sort of, like I said, a forbearance agreement, payment plan to get you bought back up on track or delay things, you know, extend your loan by six months or 12 months if you've missed for six months. You just need to communicate now. Often banks are going to ask you to fill out. Lenders are going to ask you to fill out a financial document. They may go over the phone with you. What do you pay for rent, what do you pay for utilities, you know, what's your car payment, how much do you pay in food, all these things. And it's good to be as accurate as possible with that. Don't exaggerate things. If people are pretty good about searching and seeing what you want, you say that you're spending a thousand dollars on fast food. They're gonna say, well, you could knock back down to 500 if you just go to the grocery store and buy some food. You know what I mean? That you have, you spend 500 in every streaming service out there. Well, that's where you can cut the streaming service to make the mortgage payment back. If you don't have a group locally, you don't have friends or family that can help you out, stuff like that, then you've got to have that conversation like, what do you want to do now? If you're sitting on a bunch of equity and the house is worth a lot more than what you owe on it, you have to realize it might be in your best interest to sell the house, cash out and rent a place for a period of time. A time. Okay, now, I know I'm not saying buy a new place. This is not what most people want to do. But if you can't afford to make your mortgage payment, you have the opportunity to either a sell the house. And if you communicate with the bank that your house, you're going to sell the house, they'll work with you. You can always file bankruptcy. You can file a BK chapter 13, which is going to give you a little bit of time, which would delay a foreclosure, obviously, or stop it in its tracks. It'll delay it for a period of time, but you're still going to need to come up with a payment plan that's going to work to pay that bank back what you're behind on over the next 60 months. And then if the payment plan doesn't make sense, the bank does have the right to deny it or decline that payment plan. If it just doesn't make sense. If you owe, you know, if you had 12 grand in back payments. You say, well, I'm going to make my existing payment plus 50 bucks a month. That's not really a workable plan to get caught back up. Okay, you need to speak to an attorney. You need to fill out a bankruptcy disclosure, which is nine pages of information on what you have in your 401k, what you have for bills, what other debt you have, all that good stuff. If you don't fill that out, you're gonna, the bankruptcy is gonna be kicked out, discharged, and then you're gonna be facing foreclosure. Okay? If you follow chapter seven, that doesn't mean you get to keep the property. Or if you file chapter 13, the courts have to place you into chapter 7 and that's liquidation. That doesn't mean you get to keep the property. It means you're walking away from the property and the bank is taking the property back. Okay, you don't get to keep the property. Your kids don't keep the property. Doesn't work that way. All right, all bankers is really going to delay things for you about 90 days. And then you got to start making a payment plan or look at facing losing the house. So that's why if you've got a lot of equity or you've got several bedrooms, it may make sense for you to rent your bedrooms for a period of time to get caught back up. That's one of the things that they'll ask, you know, can you rent a bedroom? Maybe it makes sense to jump on Airbnb or something like that to bring some extra cash. You know, you have anything you can sell off, they're going to ask for an extra, do you have a 401k? And most people don't know that you can actually borrow from your 401k for a period of time and pay it back without a penalty. Okay, so those are things that look at, what do you have in cash? What do you have available to you to make your mortgage payment? Because like I said, if you start missing more than one month of payment, your FICO score, your credit ratings will be shot and that's going to affect your ability to rent a place. You won't be able to buy a new house if you've got more than really one or two 30 day lates on your 24 month of credit history. You have to wait two years before you buy something. Okay? So that's why it makes may make sense for you to sell the property. List of property for sale. You know, if it needs some work, you're going to listen A little bit of a discount if it's in good shape, great. But look, talk to your realtor. You listen to what your realtor is going to tell you that they can actually sell the property for. Just because Zillow says it's worth 500 doesn't mean it's going to sell for 500. If everything around it's in the 450 to 400 range, if that's what's moving. So you got to keep that in mind. Your main if you're underwater, you may need to do a short sale where the property sells for less than what's owed and the bank forgives you of that overage. Or they may try to ask you to make a payment plan on that overage. Of what? What if I'll give you example. Let's say the house is you owe 500, the house sells for 400. They may ask you to do an unsecured loan for that 100,000. What I would tell them to do is just say, Hey, 1099 me for the difference and then you can actually Write off that 1099 by showing that you're insolvent on your tax return and not have to pay taxes on that 100k. All right, but talk to an attorney, talk to a mortgage expert. That's the most important thing. Get educated on the different things. Different options are available to you. You might be able to sell the house and under financing and as a wraparound mortgage or something like that and be able to collect the difference in the in monthly what you are selling it at versus what you've got to pay. You know, there's a variety of different exit strategies. You don't need to lose your house because the minute you start having 90 day lates, I guarantee you and start getting bombarded with postcards and letters, maybe some door knockers from investors that are trying to take advantage of you being in a distressed situation to get something at a discount. It happens. It's all public information. Once that Liz Pendants or that notice of default is filed or the foreclosure date is set, you're going to get inundated with a lot of things. I know it can be stressful and confusing, but the worst thing you can do is to sit there and do nothing. I can't tell you how many investors, I'm not investors, property owners, borrowers of ours that we've tried to communicate with and try to give them an option to help them save their house or save their credit or save the equity they have and they Just didn't do anything and they lost all. And then for seven years that foreclosure haunted them before they were able to get something they couldn't get, rent a decent place because it was they had a bad thing on their credit. Filing bankruptcy is actually better than having a foreclosure file. A bankruptcy will only affect you a short period of time, like 24 months versus a full foreclosure which will affect you for seven years. So talk to your borrower. I'm sorry, not to your borrower. You're a borrower, talk to your lender. And like I said, sometimes you got to have a come to Jesus mean like, hey honey, we can't afford this house anymore, we've got to sell it. We, you know, if you gotta cash out, cash out, put some money in your pocket, live with some friends for a period, rent a place for a period of time to get back on your feet. You know, it doesn't make you a bad person. Bad things happen to people all the time. Or as I say, bad things happen to good people all the time. Just because you're behind your mortgage or you're facing foreclosure does not make you a bad person. I know it's hard to believe that if you're in the actual situation. I've been there. I've faced losing my house before or I've done. I've worked with so many people on different loan mods and short sales over the years. I know what it's like to be emotional. It's hard to be able to make legitimate decisions and wonder if you're doing the right thing. So talk to counsel, talk to somebody who's there to help you out with. There's often a lot of times that by calling the bank, if you just need a 30, 60 days grace period, the bank's willing to give you that. They don't want to take property back. A lot of times they want basically just you to keep making that mortgage payment because the minute you start falling behind that mortgage payment, it lowers the value of that mortgage on their books and they have to start holding more reserves back too that they can't lend out. So you have options as a borrower, you just got to know your options. I know the bank isn't going to tell you a lot of times they're going to try to have you go down through oh, can you start making payments or what way can you do that? They're not always going to give you the different opportunities and then that's because you're probably talking to somebody in the servicing side or loss mitigation side of the bank. And these are often employees making 17 to 20 bucks an hour. They get a stack of files, they're on the phone all day. They're not the most friendliest people out there. Don't be wrong. Some of them are very, very nice. But you got to realize they're not invested in you. And if you're rude to them, if you lie to them, they're going to notate this in the servicing notes. And if you get a hold of somebody later on or you need, you need to talk to a manager to ex, you know, accelerate a workout solution, they're going to take that consideration like, hey, you weren't truthful, or you wait until the last minute, but don't wait till the last minute, pick up the phone and call and talk to somebody. There's a lot of times, especially right now, if you've got a low interest rate, you may be able to sell the property or let somebody take over the mortgage and you get cashed out with your equity. There's a lot of creative things you can do. And as always, if you're a distress borrower, I don't mind talking to you. I'm not going to buy your mortgage and keep you in the property most of the time unless you can come to the table some stuff. But I'm not going to reach out and try to buy your mortgage. I'm sorry if you can't pay, you know, pay, you know, stay. That's what it comes down to. I'm not trying to be mean on this. You need to know your options, but you've also got to understand and take the emotions out. And I know that's so much easier said than done, you know, and it may be more black and white for guys versus the emotional side and the nesting side that women will often have. And that's not saying anything sexist. It's just. It is what it is, all right? Especially you got kids. I know that's even more stressful. But sometimes you've got to do what you got to do and take a step back and realize, hey, you know, maybe I'm in too much house, maybe we do need to move. I'm always amazed that there's people that live all across the country that they're barely getting by. And I know it's frustrating when they barely getting by, but sometimes you either a gotta increase your income or you gotta realize the fact that you just can't afford to wear where you live. Like there's parts of like Austin that aren't affordable anymore. San Francisco, Louisiana. San Diego, Miami, I get it, these are great places or beautiful cities. You love growing up there, but it's just not affordable anymore. And you may need to look to move somewhere else. You may need to look to go back to school, you may need to look to go to. I mean there's a lot of great places to live in other parts of the country that a lot more affordable rent wise and housewives. I mean I love Austin, Texas, but I could probably buy five houses in Dayton, Ohio or Canton or Cleveland or Gary, Indian. I don't want to live in Gary, Indiana. I don't care about that. But you get what I'm saying. You got to look at the opportunity that's available out there. And I know that sometimes, emotionally speaking, when you've lived in an area, you've got a job and you haven't struggling to make rent or making a mortgage payment, it's difficult. But communicate with your bank, pick up the phone, tell them what's going on. If you got fired, laid off, get a letter from your employer that shows that so you can show it to your lend, your lender, you know, so that they see that you're not lying and then give them your progress. Hey, here's what's going on. Or I can't make a full payment this month. Can I split my payment up into two payments? We've helped a lot of our borrowers who, you know, didn't make a lot of money, but they could make, you know, they made their mortgage, but they couldn't do it all at one month. If they paid their mortgage in the first month. They didn't have any food for two weeks. And so we said, well, let's just do half now and then do the other half two weeks later and make some things happen. So like I said, ladies and gentlemen, you're not alone. There are some good people out there. Do not pay somebody a lump sum to do a loan mod on the front end. 1500 or 2000 bucks don't pay. There are crappy people out there that will take advantage of you and say they can promise you doing a loan mod or a short sale, something like that. If you give them 1500 or 2000 bucks or 3000 bucks in the front end, don't do that. Keep that money. There are plenty of good organizations out there that will help you out with it. But they'll get paid when that something goes through or they may get paid by the lender to do it, not have to take it out of your money. If you got two grand, three grand, cash, that's what you've got. Hold on to it. Don't give it to somebody to take advantage because I've seen plenty of people pay and then these people that were supposed to help them out didn't do anything. They just ran off of the money. So, oh, we couldn't do anything for you. And then you're in a worse spot. So as always, feel free to book a call@talkwithscottcarson.com that's talkwithscottcarson.com I'd be glad to help you out, advise you and what your options are. But sometimes you just got to realize, hey, it may just be time to sell cash out and move on from there. So hopefully this episode was valuable for you. I'm here to help. Have a great day and we'll see at the top. Sam.