Helping homeowners stay in their homes is important to Realtors because they seek to sustain the communities where they work and live. In this marketplace of rising mortgage delinquencies and foreclosures, that goal can be challenging, to say the least.
Over the past few years, lenders invented new types of mortgages to help families buy their first home and refinance their existing mortgage. Many of those mortgages helped families without cash for a down payment, or with less-than-perfect credit, qualify for loans known as "subprime" loans.
Subprime loans have a higher interest rate and higher costs, such as prepayment penalties. In recent years, a very popular, widely available mortgage product was the hybrid adjustable-rate mortgage (ARM). Hybrid ARMs have an initial period with a lower interest rate ("teaser rate") followed by significant increases over the remainder of the loan.
A growing number of borrowers with hybrid ARMs and other nontraditional forms of loans are seeing monthly payments jump beyond their means. With overall credit markets tightening, refinancing can be difficult, according to Leannah Hunt, president of the Silicon Valley Association of REALTORS®.
"When monthly payments become too much, the first thing to do is seek the help of professionals, whether they are financial counselors, often available through local nonprofit counseling centers, or your lender," says Hunt, who is a Realtor with Coldwell Banker in Palo Alto.
Hunt says studies show over 50 percent of troubled homeowners believe telling a lender about financial difficulties will only hasten a move to foreclosure, so they prefer to stay silent. She says borrowers should remember that lenders do not like to foreclose on mortgages.
"Taking possession of your house, maintaining it and then attempting to sell it will nearly always be a losing financial proposition for your bank," Hunt says. "Therefore, talk with your lender sooner rather than later to try to arrange new repayment terms."
Realtors can also provide assistance to troubled borrowers by explaining sources of help and referring them to counseling. "If your lender is not willing to restructure your loan, Realtors can refer you to other responsible lenders in your area," Hunt says.
Hunt warns, above all, be beware of consumer scams often advertised as "We Buy Houses for Cash," or similar slogans that sound too good to be true, because they are.
Project HOPE NOW is a voluntary alliance of major lenders who have agreed in principle to assist qualified homeowners who are on the verge of default due to resetting adjustable-rate mortgages. Troubled homeowners can call the national toll free number 888-995-HOPE for free advice and further referral.
"Remember, the worst thing you can do if you're having trouble making your monthly mortgage payment is to remain silent. Help may be available; you just have to ask for it," Hunt says.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.