During the brunt of the recent mortgage crisis, when lenders nationwide faced unprecedented levels of mortgage loan delinquency in short periods of time, it was common to see delinquent mortgages sit with no adverse lender action. The lenders did not have the time to focus on accelerating these loans and often let them sit with the equity cushion to protect their interest.
Today, however, the lending environment has changed again. No longer will a lender allow a loan to pass the 120 day default mark and do nothing. Lenders are aggressively accelerating these loans and pushing them through the foreclosure process. This is even the case with people in default that have significant home equity. If your lender is owed only 20% of the home value, as was recently the case with a 68 year old client of ours, all of your home equity is at risk and you shouldn’t assume otherwise. We should all be aware that you can lose it all with no legal recourse.
I bring this up because I believe it is important to be aware of the rights of lenders to protect their interests. For a bank or a lender it is all about money and there is no emotion. If you or someone you know is in this position you should immediately open up a dialog with the lender. Be proactive and do whatever you need to do to keep your loan from being accelerated into foreclosure.
Alternatively, if you are older and retired and in this precarious position you can also utilize a Reverse Mortgage to buy out the delinquent or defaulted mortgage to protect your home equity and avoid further risk. If you are not eligible for a Reverse Mortgage then it is in your best interest to communicate with your lender immediately and/or contact a realtor to sell your property before the lender legally moves to protect their interest and wipes out your hard earned home equity.
A Reverse Mortgage, a loan modification, or an outright property sale are all options to protect your home equity in the face of financial difficulties.
George H. Omilan