Anytime you are behind or think you might get behind on your mortgage, communication is key with your mortgage company, your insurer, your utility companies, your Realtor… everyone.

“In our society as a whole, people should realize they should communicate when they have a problem rather than sticking their head in the sand and hoping it’ll go away or fix itself,” my friend Robert Carroll said after taking the short sale and foreclosure class yesterday.

It’s so true – communication is key.  Your mortgage company understands that people sometimes face financial difficulties and they definitely would rather work with you than go through the trouble and expense of foreclosing.  It’s estimated that it costs about $60,000 to foreclose, so a period of forebearance, loan modification, short sale, or deed in lieu is a better option.

Banks are getting better about working with homeowners – possibly because the Obama administration and U.S. Treasury Department is now cranking up the pressure for them to do so.   In fairness, some companies were already doing a better job than others (Wells Fargo has a good reputation for working with homeowners). According to CNN.com,

Responding to complaints that too many borrowers are stuck in trial adjustments, administration officials said they will now focus more heavily on getting borrowers into permanent modifications. Government swat teams will go to the institutions to see what the holdup is and banks will have to submit progress reports twice a day during December.

Trial modifications are occurring because homeowners and lenders have negotiated a lower interest rate, but they have to then wait three to six months at this lower payment plan to see if they make payments on time before it becomes permanent.  To get a loan modification, you still must have the ability to pay.  If you don’t have the ability to pay, a short sale could be an option as long as you communicate with your lender.  Failing that, a foreclosure will be in your future.

Photo by Deman through Flickr Creative Commons.