Can You Keep Your American Dream?
The American dream of homeownership, cheap mortgage money (bigger is better), and relaxed lending criteria has kept our economy chugging along. Everywhere you look there are programs and seminars for "first time" homeowners or "low income" buyers offered by housing organizations, real estate brokers, mortgage brokers, lawyers, and insurance providers. They all tout the move from tenancy to homeownership and in some cases will subsidize the cost that can help you buy, build, or rehabilitate a home.
They'll teach you how to secure a down-payment, tweak your credit, and borrow (usually beyond your means) by mortgaging your future earnings. That's fine, and in most cases, everything works out. But sometimes, bad things happen to good people.
Can you say "downsize?" Where are these proponents of homeownership when you lose your job? Or when your monthly property tax payment equals or exceeds a luxury car payment? Where are they when the balloon comes due, or your loan's adjustable interest rate creeps higher or suddenly skyrockets?
Okay, now that you've learned how to buy it, who will teach you how to keep your home when the going gets tough? Who will teach you to recognize the warning signs that your continued homeownership is in jeopardy, and what steps to consider if you are in danger of losing the home to foreclosure?
Imagine, if you will, two big pots of water on your stove. One is boiling hot, the other is warming up gently. The pots of water represent the growing lack of affordable homeownership. If you were to thrust your arm up to the elbow in the violently boiling water, you would react immediately — pulling your arm from the scalding water, escaping with a mild burn — but, if you were to place your arm in the slowly heated waters, you would not realize the increase in temperature until it was boiling, and you are cooked.
The same can be said about housing affordability. Most folks don't realize when they're in hot water, and by the time they do, it's usually too late to do anything about it. Or, as they try to escape hot water, their financial and emotional hardship is further compounded by the slick and polished efforts of charlatans and scoundrels (disguised as "consultants" and "investors") seeking to profit from your misfortune.
Not all consultants or investors are deed stealers or equity thieves who promise to "help" you through the tough times, but many are. It's important to be able to recognize the red warning flag carried by predators — carried, but carefully disguised.
Remember, desperate people pay big! The sharks will eat you alive, unless you can identify them for what they are first.
If you find yourself in financial trouble:
- Don't panic. Get detailed information about the deadlines you face. Pay special attention to the date on which you would lose legal ownership of your home.
- Never sign away ownership via a quitclaim deed or other means without consulting with an attorney.
- Never make your mortgage payments to anyone other than your lender. If you can't pay, never ignore warning letters from your lender.
- Beware of any home-sale contract in which you are not formally released from liability for your mortgage loan. Make sure you know the rights you are giving up and that you agree to give them up.
- Don't sign anything with blank lines or spaces because information could be added later without your knowledge or consent.
- If you do not speak or understand English very well, never rely on the Buyer's translator.
At the first sign of trouble, contact a non profit, pre-foreclosure counseling organization. Many will listen, and offer to help without even asking your name. One such non profit organization is Society for the Preservation of Continued Homeownership, or SPOCH, for short. They'll give you straightforward, proactive, advice. If you need more hands-on help to resolve your dilemma, they can recommend third party providers... suggest reading materials, and/or walk you thru the necessary steps to save your home, your equity, and/or your future creditworthiness.
A great read for anyone buying, selling, or trying to refinance a home that's in foreclosure is "An Ethical Approach..." available on SPOCH's website.