KOK Edit: Your favorite copyeditor since 1984(SM)
KOK Edit: your favorite copyeditor since 1984(SM) KOK Edit: your favorite copyeditor since 1984(SM) Katharine O'Moore Klopf

Wednesday, March 04, 2009

If You Can't Afford Your Mortgage Anymore ...

I'm going to tell you a bit of my financial story not to garner pity but in case you also are having problems making your mortgage payments in this shriveled economy.

I'm sure that some will think that this is TMI, but I've found that when you keep quiet about absolutely everything, nobody gets information that might help them. Plus, silence about life difficulties gives them an unnecessary stigma. If this story bothers you, please just move along to the next blog rather than post nasty comments. I want people to know that being knocked for a loop by the awful economy despite having been financially responsible does not make one a "bad" person.

My husband, Ed, was laid off after 14 years on the job in October 2007. He then started his own cabinetmaking business, taking out two business loans in the process, and had a very healthy income for just over a year. Then the bottom fell out of the U.S. economy and his income pretty much disappeared. I make a very good income as a freelance editor, but editing isn't as lucrative as many other professions. What I earn can't support four people, a mortgage, two business loans, health insurance policy premiums, plus the basic expenses of life in the middle class. (Both of our old vehicles have long since been paid for.) Ed has been working part time for a grocery-delivery service and getting a few small cabinetmaking gigs here and there. Put all of that together, and we're now scraping the bottom of our financial barrel. Yesterday, we closed one of Ed's two IRAs—I have one also—so that we can make our currently due mortgage payment and pay other bills. We're not yet delinquent on our mortgage, but we will be after we use up the other two IRAs.

I just now sent an e-mail to our mortgage-holder telling them that Ed and I want to apply for a "Home Affordable Modification under the new financial stability federal legislation" so that we can keep affording our mortgage.

I asked that they call us tomorrow so that we have time to gather all of the necessary documents (past tax forms, profit-and-loss statements from our two businesses, info on Ed's business loans, etc.) ready. If things work out right, the mortgage-holder, which is required by law to participate because it received federal bailout funds, will likely lengthen the payment period of our mortgage by several years so as to decrease our monthly payments. Lenders are just getting their federal info packets on this program today, March 4.

If you know anybody in the United States having similar problems because of decreased income, let them know that the earlier they take action, the more help there is available. The further behind they get financially, the fewer their options will be, and the longer they wait to take action, the fewer the available assistance funds there will be, so they can't let fear or shame immobilize them. Send them here.

The site may respond a little slowly because so many people are trying to access it. Anyone wanting mortgage assistance of various kinds should use the short questionnaire(s) accessed through the "find out if you are eligible" link on that page. Your answers to the questions will result in your being directed to the correct page for the type of assistance that you are eligible for. For more general information, go to the web site of the U.S. Department of Housing and Urban Development. Be aware, though, that that site is also getting swamped as everyone remotely eligible for assistance goes there to look for it.


Anonymous said...

I am so glad you posted this. I didn't even know about this option. If - God forbid - my contract gets cut short, now I have a resource. I'm always afraid to let the mortgage holder know I had my income reduced because of fear that they'll just take my home away arbitrarily and figure, "oh, she can't afford it now." Does that make sense? It seems like such an irrational fear.

I hope all goes well for you and that things turn around much sooner than later. I do have faith they will eventually turn around, though.

~ Claire

Katharine O'Moore-Klopf said...

Oh, your fear definitely makes sense to me, Claire. I've long had the same one, despite always having read advice from experts that it's best to talk with your mortgage-holder before you're way behind in making payments.

I also long ago internalized Americans' attitude that people having financial trouble are somehow inferior, despite knowing intellectually that such an attitude is foolish and wrong. People definitely do a number on one another's heads.

Funny about Money said...

Good post! It sounds to me like you and Ed made reasonable moves and got bulldozed in the collapse of the economy.

You're surely not alone. I'm sitting here on the verge of a stress attack over the mortgage situation, myself. As the Bubble deflated, my son and I copurchased a house, partly to put a decent roof over his head and partly as what we imagined would be a 5- or 10-year investment. We incorrectly thought the market had almost bottomed out...I thought it would go down a bit more and then level out. Wrong!!!! The house is now worth way less than we paid for it, and we got a good buy on it (at the time).

I arranged to pay my share of the mortgage out of a large IRA, assuming that I would recover the money when we sold the house. But now it's painfully clear the value will continue to drop as the economy continues to disintegrate, and meanwhile "large" is no longer the operative term for what remains of my retirement savings. Though my financial guys pulled a fair amount out of stocks & put it into gold, bonds, and cash, I'm still losing my shirt with the IRA and in the university's laughable 403(b). I'm left with not enough to live on in retirement and a strong likelihood that my job will go away sooner or later.

Meanwhile, the kid now says he wants to quit his job and go to graduate school. While his dad is willing to help him, it develops that the Great Desert University doesn't offer many graduate programs that suit him; the most appropriate program is in Tucson. Even with his father underwriting his tuition, if he goes off to Arizona del Sud, he will leave me holding the bag--I sure can't afford to make the payments in full. I'm going to end up having to sell that house at a loss of about $30,000...and since I actually have enough in that IRA to pay off the mortgage in full, you can be sure the lender won't be cutting us any deals.

Like Claire, I also feel afraid to ask. I fear we could harm our credit rating if we express any concern about whether we can pay the loan.

These are the scariest times I've lived though since the Cuban missile crisis. At least that one passed quickly.

Anonymous said...

Kathy, thank you for sharing this. You are so right about the attitude of many people about financial difficulty, but that will change as this kind of situation becomes more widespread--sadly.

It must turn around eventually. Even if we have total collapse of this economy, a new one based on subsistence will spring up, and the issues will at least be based on tangible things, like eating, and shelter--and then Ed will be back in business.

Katharine O'Moore-Klopf said...

Yikes, Funny! I'd definitely be having an anxiety attack were I stuck with a house on which I foresaw having to take a huge loss. I really do think that the current economic situation is the Not-Quite-Great Depression.

KCB said...

Thanks, Katherine! I was able to pass this on to a friend today to share with her neighbor who's worried about losing her home.

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