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 Dear
Debt Adviser,
I am the poster child for today's housing bust. I am over my head in debt and mortgage payments. By the age of 29, I had three houses. A lot of the down payments were made by cash advances on credit cards and home equity lines of credit. I am 32 now, and when the housing market started to bust, I sold two of my properties. I had racked up $70,000 in debt from down payments and mortgage payments and my primary home has a $300,000 mortgage. I can barely afford my mortgage, but I can't pay off the credit card debt -- I can't even afford the minimum payments. I can't sell the home because the market is terrible. My credit has taken a terrible beating, going to under 500. I am embarrassed and in trouble. What I should do? I am a single father raising a 9-year-old son.
-- Brian
 Dear
Brian,
You and several million other Americans are in a similar boat. Although causes of the problem vary, the result is being over-leveraged and possibly losing your home.
The good news is that you can afford your current house payment. The bad news is $70,000 worth of debt is still hanging around like a relative with a big appetite!
You may be able to get a one-stop
solution to your problem. Normally, with too much
credit card debt, a credit counseling agency may
be able to help. For housing issues, a Housing
and Urban Development, or HUD, certified agency
is the ticket. There are some credit counseling
agencies that are also HUD-certified. One visit
can give you a good assessment of your options.
If you are lucky, you might find a credit counseling
agency that is working with a lender offering
special solutions to mortgage borrowers in trouble.
When you contact them, make sure to ask if they
have any such programs available.
Start at HUD
to find an approved agency. Next, go to the Association
of Independent Consumer Credit Counseling Agencies,
or AICCA, or DebtAdvice
to find a counseling agency that is also on the
HUD list. At a minimum, they may have some options
for you to consider.
Forget about your credit score for the moment. It will only distract you from what you need to do. It will recover as your finances do. Also, be sure to keep paying your mortgage first. The credit card guys will scream bloody murder, but you and your son need to keep a roof over your heads until you find a permanent solution.
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Steps to stay on course: |
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|
| 1. |
Contact
a HUD/credit counseling agency as soon
as you read this. |
| Be
realistic about your finances. Determine
what it will take you to be able to
pay your mortgage in full and on time
and then see if you can still satisfy
the rest of your monthly obligations.
Explore the options available to you
such as a short sale, a deed-in-lieu
of foreclosure, a pre-foreclosure sale
or a bankruptcy. |
|
| 2. |
Communicate with your lender before you miss any payments. |
| This
may not pertain to you at this time,
but for my other readers who can't afford
their mortgage any longer, the sooner
you let your lender know that you are
having trouble making your mortgage
payment, the better. Your lender doesn't
want your house back. Ask what programs
they have to help or for a deferral
plan or a mortgage debt renegotiation.
With the request coming from the Federal
Reserve for lenders to reach out and
help homeowners, you may just find the
help you need. |
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| 3. |
Be wary of offers that seem too good to be true. |
| Unfortunately, not everyone offering to help will actually provide it. Situations like this have historically attracted vultures and worse. Make sure you understand all the terms before you sign anything. |
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Good luck!
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