Should I Tell My Mortgage Company I Lost My Job?
Facing job loss and mortgage concerns? Learn how proactive communication with your lender can lead to effective payment solutions.
Losing a job can bring significant financial uncertainty, especially regarding mortgage payments. Homeowners’ immediate concern is maintaining housing stability during this challenging period. Understanding available options and proactively engaging with your mortgage servicer is a primary step. This article explores timely communication and various relief avenues to help you navigate this situation.
Why Communicate with Your Lender
Reaching out to your mortgage servicer promptly after job loss helps prevent financial distress. Ignoring the situation or delaying communication leads to negative consequences. Mortgage agreements include late fees, often 4% to 5% of the payment, which accumulate rapidly if payments are missed.
A missed payment impacts your credit score. A single 30-day late payment can significantly drop your FICO score. Continued missed payments lead to further damage, making future loans harder to secure. Ultimately, prolonged non-payment can initiate foreclosure, where the lender repossesses the property.
Mortgage servicers prefer to work with borrowers to prevent default and avoid foreclosure. They have programs to assist homeowners experiencing temporary financial hardship. Proactive communication shows your willingness to resolve the situation, often leading to better outcomes than waiting for the servicer to contact you due to missed payments.
Potential Mortgage Relief Options
Mortgage servicers offer programs to help homeowners navigate financial hardship due to job loss. One common option is forbearance, allowing temporary reduction or suspension of mortgage payments for a specified period, typically three to twelve months. During forbearance, interest accrues, but late fees are waived. At the end of the period, borrowers address missed payments through a lump-sum repayment, a repayment plan, or by deferring payments to the loan term’s end.
A loan modification involves a permanent change to your mortgage terms. This might include lowering the interest rate, extending the loan term to reduce monthly payments, or a principal reduction. Loan modifications are considered when hardship is long-term, and you can make a modified payment.
A repayment plan is a short-term agreement where you pay an additional amount each month to catch up on missed payments. This option suits those who have missed a few payments but anticipate their financial situation improving. Other options to avoid foreclosure include a short sale or a deed-in-lieu of foreclosure. A short sale involves selling the home for less than the mortgage balance with lender approval. A deed-in-lieu of foreclosure transfers property ownership directly to the lender. These options are considered when other remedies are not feasible and you wish to avoid the negative credit impact of foreclosure.
Preparing for the Discussion
Before contacting your mortgage servicer, gather information and documentation to streamline the discussion. Collect your mortgage account number, Social Security Number, and current contact information.
Provide documentation verifying your job loss and current financial situation. This includes a termination letter, recent unemployment benefit statements, and bank statements (past 30-60 days). If you have other income, such as severance or a part-time job, provide recent pay stubs. A basic budget outlining your income and expenses also provides a clear picture of your financial capacity.
Prepare a clear statement explaining your situation and what you hope to achieve. For example, state you lost your job and need to explore forbearance options. Being organized helps the servicer understand your situation and guide you toward appropriate relief programs.
Further Actions if Challenges Arise
If initial communication with your mortgage servicer is unsatisfactory, several avenues exist for further action. You can request to speak with a supervisor or a different department to escalate your concerns. Documenting all communications, including dates, times, and names of representatives, is advisable.
Consider seeking assistance from a housing counseling agency approved by the Department of Housing and Urban Development (HUD). These non-profit agencies offer free or low-cost advice and can provide guidance on your options. Housing counselors can mediate discussions with your mortgage servicer and assist with preparing necessary documentation. They are knowledgeable about relief programs and can advocate on your behalf.
If you believe your mortgage servicer acted improperly, you can file a complaint with a relevant regulatory body. The Consumer Financial Protection Bureau (CFPB) is a federal agency that oversees financial products and services, including mortgages, and accepts consumer complaints. State-level banking or consumer protection agencies may also be available. In cases where foreclosure seems imminent and other options have failed, consulting an attorney specializing in foreclosure defense can provide legal guidance and protection of your rights.