I spoke with someone who had recently gone through a rough time. It was a temporary situation, but it left him behind on his mortgage, and the bank was threatening foreclosure. He had been laid off from his corporate job, and it took about 9 months to find a similar-paying job with another company.
During the 9 months without work, he had used his available savings, and was 3 months behind on his $1,800 monthly mortgage payment. The outstanding balance on the mortgage was approximately the same as the current value of the home. He was now able to make the $1,800 monthly payment, but could not come up with the $6,000 (approx.) the bank was demanding to bring the mortgage current.
We discussed the option of selling the home, and decided a short sale would most likely be required – this was because after all closing costs and commissions were paid, there wouldn't be enough proceeds left to pay off the mortgage. The good news was that we would be close, and the bank would most likely approve it. The bad news was that his credit would be impacted, we were on a very tight time schedule, and that he didn't really want to move if he could avoid it.
He was also getting himself into the mental state of being ok with losing his house – he mentioned the bright side that his exact floor-plan a block away was available for rent for $1,200 per month. Maybe he would even end up saving money out of the deal...?
In the end, we (he) discussed the situation in great detail with the bank. He was able to, and wanted to, continue making the monthly mortgage payments. But there was no way possible of coming up with the extra $6,000 to bring the loan current.
The bank agreed to add the $6,000 in past due payments and fees to the balance of the loan, and then to reset the payment schedule so that his next $1,800 payment would be accepted, and he would have to make 3 or 4 extra payments on the back end of the loan (if he kept the loan for 26 more years.)
In the end, common sense prevailed, and both the homeowner and the bank came out ahead.
Your happy when things work out Realtor,
[tags] past due loan, renegotiating a mortgage [/tags]