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Keeping a Roof Over Your Head

Our homes are the most important part of our lifestyle—and usually our largest single investment and asset. Let’s look at how to hang on to the house when the paycheck stops.

Stay Current if Possible

Your mortgage or rent payment should be your top priority in paying your bills each month. Using unemployment compensation benefits, workers’ compensation, union strike assistance, spouse’s income, savings or help from family or friends, pay the mortgage or rent first each month.

Step 1: Understand the Terminology

First, make sure you understand the terms involved.

Default—A mortgage is in default when more than one payment is due but unpaid. Mortgage contracts generally allow for foreclosure to start when a default exists, though most lenders will not act that quickly.

Delinquent Payment—A mortgage payment not made by the day it is due.

Early Payment—A mortgage payment made before it is due. (NOTE: Making payments early doesn’t necessarily mean that you won’t be required to make payment on your regular monthly schedule. Check with your mortgage holder before making early payments.)

Equity—The value of your property minus what you still owe on it.

Forbearance—An oral or written agreement to repay the delinquency over a period of time so that the loan payments can be brought up to date.

Foreclosure—The process by which the lender takes over your property when you fail to meet the terms of your mortgage.

Late Charge—A fee, charged by your lender, to help pay for the added work of collecting late payments. Payment of the fee, however, doesn’t give you the right to pay late repeatedly. Repeated late payments are a violation of your contract with the lender.

Section 8—A government program providing private housing for low-income families by subsidizing (helping to pay for) rents. The amount of rent assistance is determined by your income. There almost always is a significant waiting list (six months to one year) for Section 8 housing. So get your name on the waiting list!

Step 2: Contact the Mortgage Holder Before You Get Behind

If you belong to an employee credit union, you may be able to get a small personal loan to cover several mortgage payments.

Generally, a lender does not want to foreclose on a mortgage. It takes time, and money may be lost in selling the property at public auction, particularly if the local housing market is weak.

Call or visit the mortgage company and ask to speak to someone in the mortgage servicing department. Identify yourself by name and loan number. Explain your situation and ask whether a reduced payment plan can be worked out until you return to work. Take notes of the conversation and get the representative’s name. In future calls, try to stick with that representative.

Follow up your call with a letter and keep a copy. Be sure your letter includes:

  • The complete address of the property,
  • A phone number where you can be reached,
  • An explanation of your situation, and
  • A request for immediate response.

Keep all correspondence from your mortgage holder in one place so that you can find it when you need it.

NOTE: Even if you’re already behind on mortgage payments, follow the step above.

Step 3: Seek Advice on Repayment Alternatives

Your bank, legal services, an attorney, a knowledgeable mortgage agent for another firm or other qualified professional may advise you about various repayment alternatives.

Some of the alternatives they may suggest:

  • Temporary forbearance,
  • Extending your loan,
  • Refinancing,
  • Selling, even if the market is depressed and a penalty is imposed because you paid off the mortgage early,
  • Voluntary surrender of the property to the lender instead of foreclosure, or
  • Bankruptcy.

A decision to sell, for example, must be made early. While the decision to sell may be difficult, a quick decision may mean the difference in getting any of your equity (the difference between the market value of your house minus the amount you still owe) out in cash. Once foreclosure begins, you may not be able to sell. Property may not be sold once foreclosure is initiated.

Voluntary surrender (handing over the property to the lender rather than having the lender foreclose) is sometimes a less harmful option if you have little equity in the home. You lose the equity, as you would by foreclosure, but you avoid having a foreclosure on your credit record. If you have not been making payments on the house for very long (two to three years or less) this may be an attractive alternative to foreclosure. Avoid foreclosure, if possible.

If a large number of conventional (those not guaranteed by the government) mortgages are held by a local lending institution, the union may approach the lending institution about “packaging” a forbearance arrangement for all the mortgages of members involved in the layoff or shutdown.

Step 4: If Your Mortgage Is Federally Insured, Contact the Insuring Agency

Federally insured mortgages, such as FHA, HUD, FmHA or VA, have special provisions for helping families in trouble. These special provisions—which are particularly attractive on FHA/HUD mortgages—may extend the period before foreclosure, grant liberal repayment schedules or even result in the government agency buying out the lender. Forbearance means that, rather than foreclosing, the lender or guaranteeing agency takes into account your situation and works out a plan to help you keep the property.

If you have any form of government-insured mortgage, it is extremely important that you learn what forbearance provisions are available to you by contacting the forbearance counseling department at the insuring agency (FHA, HUD, VA or FmHA) in your area.

Step 5: Apply for Housing Assistance Through FEMA

In areas with high poverty or unemployment rates, the Federal Emergency Management Agency (FEMA) provides funding for small grants through local community agencies for one-time assistance with a rent or mortgage payment.

In most communities, the United Way is the place to start, even though the agency dispensing FEMA funds is usually a housing or community action agency or the Salvation Army.

To qualify for a FEMA grant, you must meet individual agency eligibility requirements, which generally are pegged to your current financial and employment status. Sometimes grants are earmarked for the elderly or handicapped. Grant amounts often are small, based on FEMA’s limited funds.

Step 6: Check Other Agencies for Assistance

In New Jersey, Maryland, Michigan, Pennsylvania, New York and Connecticut, financial or mediation assistance may be available to families or individuals facing eviction.

In some communities, general assistance agencies, the Salvation Army, Catholic Charities, community action agency or other public and voluntary groups may provide limited monetary assistance to help pay a mortgage or rent.

Step 7: Consider Equity Sharing

If you are in danger of foreclosure and have a friend or relative looking to buy property, you might consider “equity sharing.”

Equity sharing consists of more than one party purchasing the same property. Your partner in the transaction would assume the monthly mortgage payment and begin building equity in the property.

A lawyer draws up a contract stating that upon sale of the property, the proceeds of the sale would be divided up according to the amount put in by each part.

Talk to a lawyer about equity sharing.

Renter's Action Plan

Step 1: Read Your Lease

First, read your lease. It is important to familiarize yourself with the terms of your lease.

Step 2: Talk to Your Landlord

About all you can do for rent payments on reduced income is to tell your landlord about your situation before the rent is due.

Try to work something out. Ask if you could make smaller payments until you return to work and then catch up the shortage. Offer to trade some property (furniture, TV or other items you don’t need), do minor repairs, cut the lawn or perform yard maintenance in place of rent.

It often costs landlords money to change tenants, so there may be an incentive for the landlord to work with you.

Step 3: Notify the Public Housing Authority

 If you live in public housing or a Section 8 home, notify the public housing authority of your reduction in income. Your rent may be reduced to a level in line with your new situation.

Step 4: Know Your Rights if Evicted

If you don’t pay your rent, the rent is delinquent when specified in your lease. If your lease is a verbal one, your rent is usually delinquent 10 days after it is due. Check it out—laws governing renters and eviction differ from state to state.

If your landlord wants to evict you, you must be given a written notice allowing you a specific number of days (which varies from state to state) to leave the premises. After the period for leaving the premises expires:

  • Your landlord may file an Unlawful Detainer Action with the court. You have a specified number of days (usually seven or less) to answer this court action.
  • A court hearing will be held to evaluate the circumstances and the judge determines the legal action required.
  • If the court serves notice, you could be evicted in as little as 24 hours.
  • If you have a lease, you still may be liable for the rent for the remaining months on the lease unless the property can be rented to others. If the property is not rented, you may be liable for rent for the rest of the lease period.
  • Your security deposit may be forfeited.

If you live in a larger city with a Rent Control Commission, there may be other, more helpful provisions in effect. Check it out. Legal aid services, such as a Legal Aid Society or Legal Services Corporation, often have a “Landlord-Tenant Hotline” where information on renters’ rights can be obtained.

Housing Alternatives

Public Housing

At your reduced income, you may qualify for public housing or Section 8 support. In Section 8 housing, private apartments/homes are rented with part of the rent paid by the federal government. Public housing rent is set according to your income. In most communities there are long waiting lists.

House Sharing

Sometimes we overlook the most obvious housing resource—a relative, friend, or co-worker who is out of work who may have room on a temporary basis. Sharing rent, food and child care can work well on a short-term basis.

“I was really embarrassed and ashamed to ask my parents to take my wife and two kids in when I couldn’t pay for the rent,” an injured UAW member in Texas reports, “but it turned out that my folks were having trouble making ends meet and my small income helped out. Mom watched our kids while my wife looked for work, and I was able to help make some needed repairs on the house. We stayed five months and it worked out great.”

Emergency Shelter

Should things get to the point of eviction or foreclosure and you find yourself in need of temporary shelter, contact your union representative, AFL-CIO Community Services liaison, the Salvation Army, Catholic Social Services or Catholic Charities or United Way. Temporary shelter for families is available in most communities.

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Action Plan

  1. Understand the terminology.
  2. Contact the mortgage holder before you get behind.
  3. Seek advice on repayment alternatives.
  4. If your mortgage is federally insured, contact the insuring agency.
  5. Apply for housing assistance through FEMA.
  6. Check other agencies for assistance.
  7. Consider equity sharing.

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