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LegalEaze: Saving Your Home

April 20, 2008 — WAPA bills are increasing, gasoline pump prices are at a record high, and generally many in our island community are discovering difficult economic times. Borrowers may find themselves unable to make mortgage payments for many reasons, including loss of employment, a cut in work hours or overtime, overspending, injury, illness or death of a family member or a co-borrower, and separation or divorce.
If you’re unable to make your mortgage payment
Don’t ignore letters from your lender. Open and respond to mail from your lender. The first notices will offer good information regarding foreclosure prevention options. Later mail may include important notice of a pending legal action.
Contact your lender NOW!
Call or write your lender before you are more than thirty (30) days in default on a payment. The further behind in your mortgage payments you become, the harder it will be to reinstate your loan and the more likely you may actually lose your home. Explain your situation and provide financial information, such as your monthly income and expenses. Lenders are open to working with you if you approach them early and if you do not make promises that you cannot keep. Lenders do not want your home – they want the mortgage payments to which you both agreed.
Contact a counseling agency
Counselors will help you assess your financial situation, determine what options are available to you, and help you negotiate with your lender. Counselors can also provide you with information about foreclosure laws and timeframes in the Virgin Islands. Counseling is available at no or low cost, is confidential and can take place over the phone or online. Your lender can provide you a listing of financial counselors or you can contact the Virgin Islands Housing Counselors Association.
Prioritize your spending and debt
Prioritize your bills and pay the most necessary for your family: food, WAPA, mortgage payments (shelter) and healthcare. Review your finances and see where you canyou’re your spending in order to make your mortgage payment. Look for optional expenses, such as cable t.v., memberships, entertainment, that you can eliminate. Delay payments on credit cards and other “unsecured” debt until you have paid your mortgage.
Use your assets
Do you have any assets- a second car, jewelry, a whole life insurance policy- that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? These efforts may not significantly increase your cash flow — but they will demonstrate to your lender that you’re willing to make sacrifices to keep your home.
Explore Loan Workout Solutions
If your problem is temporary, call your lender.
Reinstatement: Your lender is always willing to discuss accepting the total amount owed to them in a lump sum by a specific date. They will often combine this option with a forbearance.
Forbearance: Lenders throughout the Territory offered forbearance on loans when Hurricanes Hugo and Marilyn hit the islands. Often they will forbear when individuals have personal disasters. If you cannot make a mortgage payment and believe you can rectify this within a reasonable amount of time, your lender may allow you to reduce or suspend payments for a short period of time after which another option must be agreed upon to bring your loan current. This would give you the opportunity to address the financial hardship. Your lender would probably apply the missed payments to either the end of the loan or to be due in full at a later date. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time in the future. The money might come from a hiring bonus, investment, insurance settlement, or a tax refund.
Mortgage modification- You can request that the lender modify your mortgage loan terms to allow you to refinance the debt or extend the term of your mortgage loan at no or low cost to obtain a lower mortgage rate in order to continue making monthly payments.
Repayment Plan: You may be able to get an agreement to resume making your regular monthly payments, in addition to a portion of the past due payments each month until you are caught up.
If it appears that your situation is long-term or will permanently affect your ability to bring your account current:
Mortgage modification: If you can make the payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to change one or more terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:
Adding the missed payments to the existing loan balance.
Changing the interest rate, including making an adjustable rate into a fixed rate.
Extending the number of years you have to repay.
Claim Advance: If your mortgage is insured, you may qualify for an interest-free loan from your mortgage guarantor to bring your account current. The repayment of this loan may be delayed for several years.
If keeping your home is not an option — call your lender!
Sale: If you can no longer afford your home, your lender will usually agree to give you a specific amount of time to find a purchaser and pay off the total amount owed. You will be expected to obtain the services of a real estate professional who can aggressively market the property.
Pre-Foreclosure Sale or Short Payoff: If the property's sales value is not enough to pay the loan in full, your lender may be able to accept less than the full amount owed. This option can also include a period of time to allow your real estate agent to market the property and find a qualified buyer. Monetary help may also be available to pay other lien holders.
Assumption: A qualified buyer may be allowed to assume your mortgage, even if your original loan documents state that it is non-assumable.
If you’re selling the house yourself to avoid foreclosure, see if there are any complaints against the prospective buyer by contacting the Virgin Islands Department of Licensing and Consumer Affairs, the Virgin Islands Real Estate Commission, or the White Collar Crime Unit of the Virgin Islands Department of Justice.
Avoid foreclosure prevention companies
The money you would pay to a foreclosure prevention company (usually around 2-3 mortgage payments) would be better spent paying your mortgage. Your lender or a housing counselor can provide you with the same information for free or at low cost.
Beware of Scams
Never sign a legal document without reading and understanding all the terms. Get all “promises” in writing. Get professional advice from an attorney, real estate professional or a housing counselor.
Other Sources:
Tips for Avoiding Foreclosure
Help for Homeowners Facing the Loss of Their Home
Housing and Urban Development office for Puerto Rico and the Virgin Islands
–Hope Now, an alliance of 14 large mortgage service companies, counseling agencies, investors and large trade groups, offers free assistance for homeowners who can no longer afford their mortgage payments contact. (888) 995-HOPE (4673) or at ForeclosureHelpAndHope.org.

Ed. note: Nycole A. Thompson, Esq. (nthompson@vilaw.com) is an attorney concentrating her practice in foreclosure, creditor rights, and civil litigation with Tom Bolt & Associates, P.C., a full service business law firm in St. Thomas, U.S. Virgin Islands.

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