The federal government has two choices. It can bail out big banks and hope the help trickles down to homeowners. Or it can help homeowners and hope the help trickles up to big banks.
Regardless of what the government does, chances are the assistance will not be smart enough or fast enough to rescue you if you're struggling to pay your mortgage. I mean, when has our bureaucracy ever moved with the speed and savvy required in a crisis?
That's why I've always preached self-reliance. Here are some ways you can help yourself.
Ironically, the first step to helping yourself is to ask for help -- but not from the government. If you are facing foreclosure, you cannot -- must not -- go through the process alone. Just as you had a real estate agent and a title attorney who helped you get into the home, you need pros who can help you stay in it.
Specifically, you should reach out to one of the wonderful nonprofit agencies that provides housing counseling at low or no cost. Click here for a list of housing counselors nationwide. You can search within your state.
If you are facing foreclosure, start with those that list "Mortgage Delinquency and Default Resolution" as one of their services. And keep in mind they can be far more helpful to you when you are 30 to 60 days behind on your mortgage than when you are facing a sheriff's sale. They have more negotiating tools at their disposal the earlier you start.
Many people find it intimidating to approach their lender directly about negotiating a new payment plan. (In fact, the Illinois Attorney General's office told me 70 percent of homeowners never take this step.) Some housing counselors say it's a bad idea for you to call the bank yourself anyway, because your bank may persuade you to sign something that makes your situation worse rather than better.
I've also heard from housing counselors who say the bank "loss mitigation" departments that are supposed to help homeowners are utterly unhelpful. A seasoned housing counselor can help you through all this.
Do your housing counselor the favor of being on top of your paperwork. You can imagine how swamped they are right now. You will receive better, faster service if you are respectful enough to gather the documentation they need to go to bat for you. Things like:
Any and all communications from your lender
Foreclosure notices and/or court or sheriff's sale complaints
Your two most recent mortgage statements
Your homeowner's insurance policy if your pay this directly
Two months worth of pay-stubs
Two most recent tax returns for everyone listed on the mortgage
All bank account statements for the previous two 2 months
Proof of any other income (child support, alimony, SSI, disability, rental income, etc.)
One of the first steps a housing counselor will take to help you is to figure out who your lender actually is. So many loans have been sold and resold to secondary institutions, that sometimes it's hard to know who you're supposed to be negotiating with.
Notice I said to get help from a NONPROFIT counselor. The country is crawling with for-profit con artists who say they can help you negotiate a new deal with your lender. Some advise you to declare bankruptcy.