California Interest-Only Morgages Were Most Popular!
The real estate feeding frenzy of the past years has seen California leading the nation in terms of the number of issued “non-traditional” mortgages. Most popular were “interest-only” or “option” loans, which often included an adjustable rate mortgage (ARM) component.
If you are worried about making mortgage payments, you should contact your bank or mortgage company sooner rather than later toincrease your chance of keeping your home. Sharon Beton, former mayor of Minneapolis says, “Ignoring the notices or going into a state of denial is the worst thing they can do.” She advises, “If you get a lay-off notice, call your mortgage company at that time. You know the loss of your income is going to affect your ability to pay your bills.”
No One-Size-Fits-All Solutions If You Can’t Afford Your Mortgage
Because there are many different factors of each person’s particular situation, there are no one-size-fits-all solutions, typically called a “work-out” in mortgage-speak. In some cases, you will know in advance if you might not be able to pay your mortgage, and thus will be aware of the potential of receiving the first default letter.
If your problem is temporary the bank may agree to what’s called “forbearance,” which will allow you to postpone making any mortgage payments for a set period of time. The bank might also propose a re-payment plan that will permit you to make up missed payments by paying a little extra each month until you are caught up.
In some cases it might be best to re-finance, which involves negotiating a completely new loan that has a different interest rate and re-payment period.
In extreme situations the mortgage company might permit a “quick sale.” In a “quick sale” the homeowner sells the home for less than the loan amount and the lender considers the loan paid in full. This will avoid having “foreclosure” stamped on your credit rating record.