I received an email today from our mortgage negotiator, who once again told me that there was nothing she could do to help us, but that she would review the file with management and try and find a solution. The primary problem is Bank of America wants us to settle on our business credit cards that were charged off with them. The other being of course, that our loan is with Freddie Mac. Unlike our investment property, which is with Fannie Mae, and with which we received a loan modification with the greatest of ease.
I was recently reading an article in "O The Oprah Magazine," yeah, whatever, I read "O," where Suze Orman worked with a couple that had a similar situation to ours. In the article, the couple had debt payments and a mortgage payment very close to our own. They had a mortgage payment of $2,641 and monthly debt payments of $2,475. Now these are not an exact match to our own debts, but the average is pretty darn close.
The couple was put on a trial payments and waited 14 months for an answer for approval of a loan modification, but were ultimately declined. The bank then wanted the couple to pay the back payments and difference between the modification trial payments and their regular payments. The couple could not afford to make the back payments and now face foreclosure. Does the couple have any hope of saving their home?
Here is the 6 point action plan that Suze recommended for the couple:
- Don't pay the mortgage. Suze recommended, since the bank is foreclosing, that the couple stop paying the mortgage. However, she said the money they were paying monthly on their trial modification needs to be put into savings. It could be two months, six months, or even longer before they actually need to move out of their home and they should save as much as they can.
- Do pay back the credit card companies. Since they have not missed credit card payments it was the best way to raise their credit scores.
- Scale back. Find even more ways to save money. The couple was paying a combined $250 on their cell phones, landline, and cable. She suggested they get that combined total down to $100. She also recommended they reduce their eating out budget and taking no vacations.
- Get more protection. The couple already had term life insurance, but not even close to half of the $1,000,000 each she thought they should have. She feels they both could get coverage for less than $100.
- Focus on saving. The couple needed to take the extra money they were saving once they moved to create their 8 month emergency fund. After that they needed to get going on their retirement.
- Accentuate the positive. Even though they were losing their home they had to look at the money they would be saving as the beginning of building a brighter future.
Our debt snowball is about begin with the first of our debts to be paid off in just the next few months. After that, by this time next year we will have paid down at least another $25,000 in credit card debt and have several more accounts and loans paid off. At that time we will have an extra $1,000 a month available to us to either easily pay our mortgage or put more towards our debt and speed up our five year balance liquidation plan. I only hope we can hold on another ten months, but I am begging to feel like our time is running out.
(Via O The Oprah Magazine March 2011)
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