Whether you’ve suffered a loss or simply can’t afford to pay your mortgage, home foreclosures are more common than one might think. We asked Donna Pisciotta, a partner at Dalton & Finegold, LLP, to explain some of the reasons why homeowners are forced to foreclose: “The simple answer is loss of job, sudden accidents, sudden death of a spouse/co-owner, disability, and health—all of which render a homeowner unable to pay.” These events are nearly impossible to predict, and they can have a devastating impact on a homeowner’s livelihood. Pisciotta has spent a lot of her career doing foreclosure work, and is very familiar with just how devastating this loss can be.
Know Your Mortgage
After explaining some basic reasons for foreclosure, Pisciotta elaborates: “The more complicated answer is bad loans. After 9/11, the government gave lenders incentives to lend money to stimulate the economy. As a result, lenders created products for buyers and placed them in programs that these homeowners could not handle. Eventually, it caught up with them.” With this in mind, there are things to look out for that may make it more difficult to keep a mortgage out of foreclosure:
- Negative Amortization Loans. This type of mortgage has an adjustable rate, and payments are so low that they don’t cover principal and interest on a monthly basis as a conventional mortgage should. Pisciotta says that “the low payment helps in the short term, but the interest keeps getting added on, so buyers are never able to get ahead.”
- Interest-Only Loans. These mortgages are similar to Negative Amortization Loans, but no principal is paid for a certain period of time. Pisciotta says that, “when that time expires, the payments go up significantly, and people default because they can’t handle the increased payments.”
- Stated Income Loans. These loans are distributed without verification of a buyer’s job and income. According to Pisciotta, “people stated what they made, and the lenders did not verify it. As a result, many people lied about their income.” It may seem like a hassle to jump through hoops to verify your income, but it often goes hand-in-hand with working with a responsible lender.
Mortgage Assistance and Foreclosure Avoidance Programs
Look, we’re not making any promises. Some homeowners don’t qualify for assistance, but before you get too far behind on your payments, we recommend you see what’s out there.
- You can find federal assistance programs through the Department of Housing and Urban Development (HUD).
- A lot of homeowners also find assistance programs run by their state government or local organization. Take a look at this handy state-by-state directory.
- Beware, too. The sad truth is that there are also plenty of foreclosure scams out there. Here’s a great rundown that should help you avoid common foreclosure scams.
Storage for Recent Foreclosures
Whether from a bad loan or rotten luck, if you’re forced into foreclosure, you may have to rent an apartment and/or stay with a friend or family member. In these cases, there’s a good chance you won’t have enough space to store your home belongings and furnishings. It’s easy to be tempted to sell everything you own to put off some tough financial decisions, but there may be items of personal and financial worth that you want to hang on to.
Put another way, Closetbox can’t change your mortgage payment or your sudden loss of income, but we do provide complimentary storage pickup with storage rates that compete with traditional self-storage units. Especially if you’re dealing with hard luck and a hard-nosed lender, this pickup service is the best way to get the storage solution you need in the available time frame.