No. of Recommendations: 0
While visiting my sis over Christmas...learned they are in an upside-down home loan + have $30,000 credit card debt.

They have apparently refinanced home several times during past decade & included in the 'refinance pkgs' their credit card debt, car loans, remodeling & new furniture expenses, etc. Now, their home appraisal value < mortgage balance. B-I-L lost job during 2008...resulting apparently in 'taking cash advances' for monthly living expenses & poor-judgement spending binges. They are behind 2 months in $1500 monthly mortgage payments(& now accumulating late $350 charges) PLUS credit card $600 finance charges exceed the $500 minimum required payment...a no-win situation.

A co-worker just successfully completed a modified mortgage, supposedly based upon earlier legislation passed by Pres.Bush. I am not familiar with this 'modified mortgage program'...so not sure if this would be of help to sis' plight or what other options are available to them.

All helpful suggestions are welcome...Apache
Print the post Back To Top
No. of Recommendations: 7
<<A co-worker just successfully completed a modified mortgage, supposedly based upon earlier legislation passed by Pres.Bush. I am not familiar with this 'modified mortgage program'...so not sure if this would be of help to sis' plight or what other options are available to them.

All helpful suggestions are welcome...Apache
>>


It seems pretty clear that they have been spending too much pretty much forever. A good place to start would be a crash program to live within their means and start accumulating cash rather than debt.

I'm guessing they can hardly imagine doing that, however.


Seattle Pioneer
Print the post Back To Top
No. of Recommendations: 4
A co-worker just successfully completed a modified mortgage, supposedly based upon earlier legislation passed by Pres.Bush. I am not familiar with this 'modified mortgage program'...so not sure if this would be of help to sis' plight or what other options are available to them.

All helpful suggestions are welcome...Apache


SP was short and to the point, but I'll expand on what he said.

Mortgage modification (isn't that the one called Hope?) can work well for people who generally have their finances in good shape, have steady jobs, don't carry a huge burden of debt, and are in the right-sized house, but who were talked into getting the wrong mortgage. Changing the terms of the mortgage so that the lenders still get their money, plus interest, but the home-owner isn't hit with an unaffordable payment upon the reset is definitely an improvement over foreclosure.

But mortgage modification will not work for people who are using debt instruments (credit cards and repeated house refis) to subsidize a standard of living that they can't actually afford, and who have been doing so for several years.

I don't know whether there is anything that can actually help them, but I would suggest that they find a credit counselor through the National Foundation for Credit Counseling.

http://www.nfcc.org/

There are a lot of rip-off and scam companies out there that promise credit card help, but will leave consumers in worse shape than before. The NFCC sets certain standards for its members to meet, and you can be sure that they will not make the situation worse. The NFCC is sort of an umbrella organization, and the various credit card counseling companies are members.

I'm sorry I can't offer better solutions, but looking at the information you've posted, I'm not sure that there is a way out of the mess that doesn't involve foreclosure and/or bankruptcy.

Nancy
Print the post Back To Top
No. of Recommendations: 14
While visiting my sis over Christmas...learned they are in an upside-down home loan + have $30,000 credit card debt.

And did they cut back for Christmas by not giving any gifts and having cheap meals? Or did they continue to live above their means by charging things on their cards "because it's Christmas"?

They have apparently refinanced home several times during past decade & included in the 'refinance pkgs' their credit card debt, car loans, remodeling & new furniture expenses, etc. Now, their home appraisal value < mortgage balance.

Okay, so they used their house as a 4-sided credit card to enable them to live above their means. And then further compounded their mistakes by using credit cards to continuing living above their means. As a result, they are upside down on their house due to consumer debt, and have additional consumer debt besides.

B-I-L lost job during 2008...resulting apparently in 'taking cash advances' for monthly living expenses & poor-judgement spending binges.

So apparently the shock of a job loss didn't spur them into trying to live within their (even lower) means.

They are behind 2 months in $1500 monthly mortgage payments(& now accumulating late $350 charges) PLUS credit card $600 finance charges exceed the $500 minimum required payment...a no-win situation.

A co-worker just successfully completed a modified mortgage, supposedly based upon earlier legislation passed by Pres.Bush. I am not familiar with this 'modified mortgage program'...so not sure if this would be of help to sis' plight or what other options are available to them.


There is legislation that is designed to help homeowners with mortgages that have/will become unaffordable due to rate resets. And mortgage companies are trying to work with homeowners who have mortgages that meet this criteria. However, in this case, the mortgage is unaffordable due to job loss, which is a different circumstance.

Have Sis/BIL been talking to their mortgage company? I am sure that, being 2 months behind, the mortgage company has been trying to contact them. If they are burying their head in the sand, the first thing that they need to do is to take their head out of the sand and talk to their mortgage company to see what options their mortgage company can suggest.

Some possibilities include:
- Forebearance/Restructure - if BIL has regained employment at a similar compensation level, or believes he will soon, the mortgage company can allow 3 - 4 months of minimal/no payments, and tack the missing payments onto the end of the mortgage

- Mortgage modification - if BIL has regained employment, but at a lower compensation level, but still enough to afford the house, this may be a possibility. Basically, they will have to reapply for a mortgage, with updated income/debt statements. If the mortgage company can find a mortgage that they can afford, they will try to work with them. Modifications may involve lower rates, longer terms and/or giving up some of the gains in their house when they sell, possibly in return for some principal forgiveness. However, if Sis/BIL cannot afford any mortgage for their house because their credit card bills are too high, or because BIL is still unemployed, this probably isn't a good possibility.

- Short sale - if the possibility of BIL getting a job soon isn't good, then they can put their house up for sale, and try to negotiate a short sale. If they live in a state that allows deficiency judgments, they need to make sure that the mortgage company is willing to forgive the debt rather than get a deficiency judgment against them.

- Deed in lieu of foreclosure - if they don't think that they can sell the home in a short sale, then this is probably better than a straight foreclosure. Sometimes, if the home is in good shape, the mortgage company may even provide some help with moving costs in order to avoid the legal costs of foreclosure and eviction

- Walk away/Foreclosure - Probably the easiest option for them in the short-term, if they are going to lose the house anyway. Failing to make payments and ignoring the attempted contacts from their mortgage company will result in this. One day they will get a foreclosure notice, and they should plan to be living someplace else by the date of the sale, or they risk having the sheriff come to evict them. Since they are currently 2 months behind on mortgage payments, this will probably give them at least another month, and possibly longer, depending on their state's foreclosure laws, of living in the house without having to pay for it.

- Bankruptcy - for a while, this will shield them from being foreclosed upon, and it has the potential to wipe all of their debt away. However, it comes with a credit history hit for at least 7 - 10 years (depending on which chapter is filed) along forever having to answer "Yes" to the question "Have you ever filed for bankruptcy?" on any loan application in the future. And if they want to keep the house, they will eventually have to come up with a way to make payments on the house. Filing for BK while BIL is unemployed will probably give them the best shot at qualifying for Chap 7 - which is the type of BK where all unsecured debts can be forgiven, and there isn't a payment plan. If this is the option chosen, Sis/BIL need to start saving some cash, since BK lawyers generally want payment upfront before filing - for some reason they don't like to extend credit to their clients.....

As already mentioned by SP & Nancy, the main thing that Sis/BIL have to do is to start living below their means. If they can't do that, none of the above options will help them in the long run.

If they have access to a computer, suggesting that they join TMF, or at least look around at some old posts, might be a step in the right direction.

AJ
Print the post Back To Top
No. of Recommendations: 4
Many thanks for your helpful comments. It was an awful shock to hear this alarming state-of-financial affairs from sis.

Sadly...I must admit that sis/b-i-l did not slow down for Christmas...she continued to shop, maintaining that credit card debt is his doings, when she spends with cash indulging the children as if nothing is amiss. It seems that they are playing the 'blame game' instead of putting their heads & earnings together in developing a plan to pay-off their bills. Now,slowly being revealed to me, my elderly parents have bailed them out several times & are still subsidizing them. Basically, due to early warning signs that b-i-l had poor financial control...sis opened & maintained her own acct--dividing financial responsibilites...e.g. she covers insurance premiums, groceries, utilities, children's clothes, & yes vacations!!, while he covers mortgage payments, car purchases, home upkeep/repairs. Yes, sadly, it's obvious to everyone but the actual 'debte duo' they have overspent & lived way-beyond their means.

After a restless night's sleep, I realize a bail-out will not help them...only a cold-hard look at reality seems to be in the cards for them. Sis seems to hope that I will have a 'magic-wand' solution...but there is none.

I will refer them to the National Foundation for Credit Counseling & to TMF, as mentioned in previous responses...but, they need to move beyond the blaming-one-another stage first & really work together on their monster debt.

Once again...many thanks...Apache
Print the post Back To Top
No. of Recommendations: 1
Oh my gosh does your sis live in the Dallas metroplex area?

xtn
Print the post Back To Top
No. of Recommendations: 4
my elderly parents have bailed them out several times & are still subsidizing them

IMO, this is where you should concentrate your time. Point your sis in the direction of Credit Counseling, but if she and her husband want to drown in debt that is their choice and their problem. BUT, you should have a good heart-2-heart with your parents to not only stop the economic outpatient care/co-dependancy they're giving to their daughter, but need to make sure their hold onto their money should they need it in the future for things like expensive medical or assisted living care.
Print the post Back To Top
Advertisement