If you are actually delinquent on your mortgage and are scared that you are going to face big problems, you are wrong. You are fine. It’s the people who actually put a full down payment (money they were able to save because they have the financial means and know how to manage their money) but got screwed by a predatory loan and can’t handle the payments, or need to sell due to life situations (divorce, death, sickness, loss of job, etc.) in a weak sale market that can’t get any help! See my post about house in Florida. How is that possible? Well, it’s the nature of the business. Here is the strange thing about mortgages… you don’t get any relief unless you are completely in default, your credit is a mess already, and you have neglected the situation for a while.

If you put no money down (because you can’t save a dime, or had no financial means — and should have never received a mortgage in the first place), you put no money into your property through improvements, and your house is now worth less than you own, then you will be fine. Huh?! Yes, I know it sounds crazy but it’s true. Banks have so many options for these people… I call it mortgage welfare. They bail you out. They take 20% deduction off your principal balance and just mess up your credit for a year or two (you know, the credit you don’t really need, anyway, because all you are going to do is piss it away on clothes and electronics, and other useless stuff). Plus, there is a nice surrender term called “dead in leau”, meaning you simply surrender ownership of your home for in exchange for a gentler foreclosure. Go figure….

OK, here are options for folks who can’t afford to pay their mortgage and can’t afford to sell:

1. Let a Realtor or an investor (watch out for shady ones!) short-sale your home. See related post
2. Go into foreclosure (bad choice)
3. Bankruptcy, which is much harder to “get” these days than you think
4. Dead in leau – “here you are, bank, here are the keys to my house”
5. Loan modification – reduce your payment to something you can actually afford
> This can be achieved by simply lowering your interest and forgiving you the late and processing fees that are just gravy for the bank, anyway
6. Give your house away to a relative who can afford the payments

In all cases, except #5, you give up any equity, as well as forgo all of the payments you have made over the years. But if you are in this situation, you probably have no equity, and your payments were likely 90% interest, anyway.