Your home mortgage is past due, payments have been missed, you’re delinquent as they say. The bank or lender is sending notices, calls are coming in asking of your intentions. As you struggle to make sense of it all the question arises: what are your choices, your options in handling this unfortunate situation.

You didn’t ask to default, it wasn’t what you wanted, you’ve always been good about paying bills. But things changed, jobs were lost or downsized, maybe illness took a toll, expenses increased, money became tighter and tighter and something had to give and the biggest bill is the mortgage, that house payment that every month eats up more and more of your cash. Then, one day, it just can’t be done, the money isn’t there, nothing is left in your account and the checkbook just doesn’t balance anymore.

An installment is missed, then another. The phone starts ringing with questions from the lender until you just don’t want to answer it anymore. Letters show up with demands, offers, requests for information but what can you say, you’re broke.

Now what?

When you get behind in your mortgage there are five things that can happen, unfortunately, the bank controls four of them. These five courses of action are pretty much all that’s open to you as you try to decide what to do about this difficult situation.

The first alternative, the only one in your power, is to find the money, catch up the payments and stay on track in the future. If you could, maybe you would…sadly the reality is that you’ve now fallen so far behind that the amount needed is way beyond your ability and there’s nothing left in the kitty. If the money was there, you wouldn’t have gotten behind in the first place.

So, here are the other choices, each one depending on the lender and subject to their agreement:

Give them a deed to the house, known as a ‘deed in lieu of foreclosure’. Tell them they can have it and you’ll sign it over. First, banks rarely do this. They don’t want your house back and certainly not that fast. Too many houses in their inventory already. Anyway, it takes clear title, an appraisal, a credit check to see if you are really that broke. Don’t count on this being acceptable but if you have somewhere else to go it’s worth a try.

The next plan is a ‘short sale’. This is where you sell your house for less than is what is owed on it and the bank writes off the balance, you hope. It takes a realtor who knows the short sale routine; it takes a buyer who is willing to pay close to market price–appraised value–for your house and who is willing to wait for the long and time consuming process to wind its way through all the paperwork; and it takes a bank willing to accept less than what’s owed. Short sales do work, they are being agreed to by banks. The problem is how long it takes, the documents needed, the value offered, the patience of the buyer and if there is a second mortgage or other liens that need to be addressed.

The third approach you could take with the banks permission is a modification of the loan. Lower the payments so that you can now afford to make them. This depends a lot on the bank–their willingness to work with you; it also depends on your income–whether it is enough to allow for such a modification. To change a payment only three parts of the loan come into play: the interest rate can be lowered, the term or length of the loan can be extended, and the amount financed can be lowered. Do not expect the bank to do the last one, lower the amount you owe. A modification is a good approach if you want to save your house, if not it’s a waste of time and a lot of headache.

The final choice, the last option if all else fails, is foreclosure. This is where the bank sues you to take back the house. A long process that puts you in court and ends up with you moving when it’s all over. That whole procedure will be discussed in another newsletter.

This article is, of course, a quick summary and a lot more information is needed before any real choices can be made. If you are faced with the problem of being unable to make your payments, call Your Florida Lawyer, Michael J. Cooper, set an appointment, let’s talk about what plan works best for you.