You have choices to make

I’ve written a lot to warn about the dangers of waiting too long to face down your foreclosure problem. No matter when you decide to take action to solve your foreclosure problem, you always have options.

I’ll tell you a true story.

A woman came in to see me about her foreclosure problem. An action was just commenced against her; she was about 6 months behind on her mortgage. She already had one previous foreclosure that ended up in her loan being modified. She complained that the prior modification didn’t provide her any relief; that the modified monthly payments were nearly as expensive as they were previously. She wanted a “real” modification – one that cut her interest rate, dropped her monthly payment significantly, maybe ballooned all of the arrears. She wanted to fight.

Then she considered her options. Fighting costs money and fighting costs time. The time spent fighting would add to her arrears and she would end up with a higher monthly payment. That’s even if she would have qualified for a second loan modification. After all, not a lot of lenders will modify the same loan twice.

Even though it was tough, she knew that her current payments were probably the best she could do. She was able to scrape together some money borrowed from family and reinstated her loan.

I’ll tell you another true story.

A man bought a piece of vacant land with the intent to build a house. He bought the property for next to nothing and used his expertise to build an amazing house at cost. He took out a construction loan (which typically has a short repayment term) to build the house, and then took out a standard 30 year mortgage to pay off the construction loan. It was affordable when he took the mortgage, but remember that this was an amazing house in a great neighborhood in Westchester. The man made a big mistake because he didn’t account for the fact that his property taxes would increase to about $25,000 per year, which added about $2,000 per month to his mortgage bill almost immediately. He went into default right away. Oh, did I mention that he was in the middle of getting divorced at the time?

He had options. He could have sold the place for a profit (and had the proceeds equitably distributed between himself and his soon to be ex-wife). He could have tried to rent it out to someone if the market rent would have covered the newly increased tax payment (and shared the rent with his soon to be ex-wife). He also needed to leave his marital home. He decided to dig in and fight.

That was in 2009. Through some good luck and some sloppy work by the bank’s attorneys, he’s still in that house today nearly 9 years later. Sure, whatever equity was in the house is gone, but he hasn’t paid a mortgage or property taxes in a whole 9 years. The time is coming that his property is going to be sold at auction. He still has a bankruptcy filing or two that he can use to further prolong his residency.

You may not think that what either of these two people did was right. You may not like that some people get lucky and can live “rent-free” for 10 years. You may think that banks are inherently evil and that you always fight back. The point is that you have options, and the choice is yours. Choose wisely.