I get a lot of emails. I prefer you post to the blog. But I do want to respond to some of them. As you know, I don't give legal advice and I don't tell you what you should do. But this information will help many others so I am posting it here.

Here is a typical one that I got over the weekend. I promised total anonymity as always. I edited for clarity and to reflect some other emails that are very similar:

Hi Richard, thanks for your tips.  This is the situation.

I lost income recently, and my mortgage is resetting next month. I have no credit available to use for payments. The lender insists on the current payment and the past one, before they will bring my loan current. And I cannot make both payments.

I have income coming in but will not be for another month or two before I collect some of it. I work in a commission based situation and cash flow is uneven.

I have paid on time so far except for one time paying after the 16th but within 30 days.

 

What should I do if I really want to stay in the house? I need some relief for six months.

 

Thanks for your kind offer to answer back. God bless you.

"Daryl"

Daryl, here is what I understand about your situation. You have a good payment record and you are in a jam.

Once you are late with a payment, the lender will not reinstate your loan until you have brought your account up to date. That means if you are two payments late, you have to at least pay those two payments. And the interest charges. And miscellaneous charges such as foreclosure or legal fees, if the lender has incurred those.

This makes it tough already if your income is interrupted by an unexpected event. But even worse, is an ARM that is resetting. ARMs resetting mean your payment will be that much higher.

I would do this. I would look at my income, basing it on the past 12 months, and determine if I can really afford those new, higher ARM payments. And I'd make contact with the bank's loss mitigation department and do a loan modification with them. I'd present my case with the right paperwork and the right backup. The case that I'd be presenting is "I have a decent income but I won't be able to afford the higher payments. I can afford the existing payments normally. So I need you to reinstate the loan and let me pay the delinquent amounts over the next year. And I need you to agree not to reset my loan payments."

Two things the lender wants to see. One is that you have the financial resources and the character to stick to your word. They want to see the income justifies you will indeed be capable of making those payments in the future. The fact that you paid on time and were never 30 days late speaks very well in your favor.

The other thing the lender wants to see is that they are better off working with you than getting the house back as an REO, or bank repo. If you owe as much as the house is worth, they figure they will lose money if they get the house back. So I would also provide them with evidence of what the house is worth in my plea for them to not adjust the ARM payment.

So you ask for a loan modification and you explain how they are better off working with you than the alternative. And you present your evidence in the form of proper paperwork: proof of income, hardship documentation, house value such as a Broker Price Opinion. That package, brought to the attention of the right people, may get you what you need right now.

My thoughts and prayers are with you and your family.