The Obama administration announced a foreclosure prevention and mortgage reduction program about two months ago, and as of April less than 1000 loans have been refinanced under the program. One of the reasons that this program is getting a slow start may be that banks are hesistant to work with struggling homeowners who are still making their payments. A recent Los Angeles Times article profiled a family who tried to negotiate with their servicer to no avail, and once they missed a payment the servicer opened negotiations. So if you were a struggling home owner should you skip a mortgage payment just to get a bank attention?
Logically, it makes sense that a bank probably would not try to lower your financial burden if you are still making payments. If you are still paying on time it means that you are able to afford the payments in the eyes of the bank or servicer. At this point you can ask for a refinance, but if you have significantly negative equity in your home then a refinance may be difficult to achieve.
Usually banks have a loss mitigation department, and they do not automatically spring into action until you are missing payments. It is possible to contact the loss mitigation department directly before you miss a payment and explain your situation. Generally you have to prove that you have a reasonable financial hardship and the loss mitigation department should present you with an array of options including short sale or modification. A foreclosure is very expensive for any lender so the loss mitigation department will try to help you keep your home and keep you as a paying customer.
If you are on the verge of missing a mortgage payment, you should definitely consider your long term plans for staying in the house you are in. If there is no possible way for you to pay for the home even after a modification then the most financially beneficial thing to do may just be to walk away from the home after living in it as long as you can. This is not a decision to be taken lightly since a foreclosure will stay on your credit history for seven years, but at least you can live in your home for free for a few months and save up as much money as you can.
If you assess that a mortgage modification to a lower payment could help you keep the home and the bank is simply not listening, then skipping a mortgage payment might be the best way to get its attention. Missing one payment will also ding your credit a bit, but it is not nearly as bad as a foreclosure. Once your bank starts talking to you you would need to keep continuous contact with them to find out what the best payment modification option is for you.
Finally, if you are having trouble affording your mortgage, then you should contact your servicer as soon as possible. Most servicers are quite busy these days so you have to be persistent in reaching them. There is some free help and good advice at http://www.shortrefiusa.com. The worst thing to do is to drain your savings and 401k accounts to forcibly pay for your mortgage. If you have to miss a payment it is probably best to do it sooner rather than later so you get the proper attention.
If you are struggling with your mortgage, is your bank being cooperative right now? Do you feel like you have to miss a payment?
