Mortgage Payment Troubles — 9/05/08

Mortgage Payment Troubles -9/05/08

Intro: Are you having trouble paying your mortgage? Many thousands of Ohioans are threatened with losing their homes in foreclosure. But there may be ways to protect your house, as attorney Mike Solomon explains.

Jeff: If you've fallen behind in your mortgage payments and the bank is threatening to foreclose, what can you do?

Mike: Jeff, there are several steps you should take:

Step 1: Congress recently passed the Housing and Economic Recovery Act of 2008. This program begins this October 1st. Under his program a borrower in danger of losing his home can refinance into a more affordable government insured mortgage. Even though the program does not begin until October 1, you should contact an FHA approved lender to start the paperwork process to see if you qualify for the program.

Step 2: Contact your lender as soon as possible. Don't just ignore them and fail to make payments because once they turn it over to an attorney to foreclose, it is much more difficult to negotiate a payment plan.

Step 3: Consider hiring a lawyer to help you before the foreclosure action begins to see if you can negotiate out of your problem. If you can't afford a lawyer, contact a HUD approved housing counselor who can help you deal with the lender. HUD funds free or low cost housing counselors nationwide. You can go on the HUD website at to find this information.

Jeff: If none of these steps work, is there any hope?

Mike: The last option is litigation. There was a recent case decided by the Ohio Court of Appeals in Franklin County that could Ohioans. In that cased an elderly widow, Mrs. Swayne, borrowed money from a small finance company to fix up her house. The company lent her $20,000, but took out almost $7000 in fees and charged her an interest rate of at least 37% on the 20,000. The widow was on a limited income from social security and clearly could not make the payments. Of course, she quickly defaulted and the lender took away her home.

The Court decided that the terms of the loan were unconscionable and that the loan was invalid. The lender was actually held liable for damages to Mrs. Swayne of over $400,000! The Court explained that, to have a loan declared invalid, you must prove two important points:

1. You, borrow, are unsophisticated and have little knowledge regarding financial matters. For example, in the case I mentioned, Mrs. Swayne never handled financial matters and did not receive any legal advice on the lengthy documents she signed. .

2. The terms of the loan must be grossly unfair. For example, in the Swayne case the loan interest was over 37% and Mrs. Swayne lived on social security and did not have enough money to make the payments so she would have to default on the loan.

Although Mrs. Swayne was fortunate that the Court let her out of her bad deal, you should not rely on a Court to save your home. Don't take a loan unless you understand what you are signing, and you are certain that you can afford the payments.

Jeff: thank you.