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Step 1
Once you are behind in your mortgage payments, contact your mortgage servicer's loss mitigation department to let them know why you are behind in your payments. Is there a temporary hardship? or loss of employment? Some mortgage servicers are easy to work with, and some will be reluctant to work with you. If yours is easy to work with, they will ask you for information about your current income and expenses to determine if a workout will be possible and how they can structure a workout for your situation. If they cannot seem to help you, they may provide contact information to your local HUD Office, who may be able to help negotiate a new mortgage for you.
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Step 2
If your mortgage servicer is reluctant to work with you, then you will need to find a third party to represent your interests and to negotiate for you. This person should understand the loss mitigation process. There are many loss mitigation specialists who regularly advertise their services in local newspapers and in telephone directories. They are not free services, though. Ask how much they charge for their service near the beginning of your conversations with them. If you are willing to use the loss mitigation or workout specialist, then you must be prepared to sign a letter giving the specialist permission to represent you in this matter. The letter will go to your mortgage servicer and, from that point on, he will try to work out a fair solution with them based upon what you can realistically afford to pay.
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Step 3
During the negotiation process, the loss mitigation specialist will contact you to let you know how things are progressing. That may be every 10 days, or it may take as long as a month. It most often depends on how busy your mortgage servicer is. It is always best to wait for the specialist to call you and not the other way around.
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Step 4
Once the loss mitigation specialist has negotiated an acceptable workout plan with the mortgage servicer, he will contact you and inform you of the results. You must accept or reject the offer. The most common result of negotiations in a loss mitigation case is that your missed payments and late fees will be attached to the back of your loan while you continue to make your regular mortgage payments. Other common workouts include your making a slightly higher mortgage payment for two or three years to make up for the missed payments and fees. There are other possibilities, but those two are the most common.
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Step 5
If you know you will not be able to afford a high mortgage payment now or in the next year or two, go to your local HUD office and work with a counselor who may be able to create a government guaranteed 30-year fixed rate FHA mortgage loan for you in place of your current mortgage. They will first conduct a new FHA Appraisal of your home and then create a mortgage that is 90% loan to appraised value. It also eliminates any subordinate loans (like your current loan) and has no prepayment penalties. You can call your local HUD Office for more information at the Hope Alliance (1-888-995-HOPE), or call HUD directly at 1-800-CALL-FHA.
