When a Job Loss Hits Home: What to Do About Your Mortgage

As borrowers continue to lose their jobs, they're finding it increasingly difficult to make their monthly mortgage payments. A steady decline in home values has resulted in many unemployed borrowers who, in addition to being unable to afford their payments, are "underwater" – they can't sell their homes for the balance they owe on them.

Michelle Kirmser, Esq., VP, Asset Recovery Manager for Unity Bank, a community bank with offices in Central New Jersey and Pennsylvania, states that job loss doesn't have to result in foreclosure. In fact, many community banks may be more understanding, flexible and accessible when hardship strikes. That's because community banks tend to maintain control over the loans they originate while larger lenders frequently sell their mortgages to other financial institutions. Name and face recognition in a local community bank can be a plus when a mortgagee falls on hard times.

Still, with the number of job and business losses, many homeowners are left wondering what's in their best interests, especially when there are no promising job prospects in sight. Some mortgagees believe that bankruptcy is the only viable option. It's not. Bankruptcy doesn't erase your mortgage debt. While you may receive payment relief, similar relief may be obtained by negotiating directly with the lender and without the stigma of having filed bankruptcy. Keep in mind that a bankruptcy may appear in your credit history for up to 10 years from the filing date, adversely affecting your ability to obtain credit and even a new job.

Kirmser offers some sound advice to those who are experiencing hard times and who are finding it increasingly difficult to make their monthly mortgage payment. "The first thing you need to do is notify your lender of any changed circumstances, such as a job loss or illness. If you're a small business owner impacted by the economy, this is also information that should be communicated to your home mortgage lender. It is beneficial to meet face-to-face with your lender to present and discuss updated personal information or to show substantial losses in your business. Ask if the financial institution has any programs available to help you work through your current crisis. Most importantly, the homeowner must be reasonable and realistic in assessing his or her situation."

Financial institutions may be able to offer programs that consider your present circumstances, especially if they know that your situation is likely to be temporary. For example, the lender might reduce your payments for a period of time. This is typically accomplished on a temporary basis by a Forbearance Agreement which protects both the mortgagee and the financial institution. Under the terms of this agreement, which typically ranges from six months to two years, the lender may agree not to foreclose provided you make the required payments. Another option may be a short sale; this occurs when the home is sold for less than the outstanding mortgage. This may be a good option, especially if the lender is agreeable to discharging you from any further personal liability on a deficiency after the sale. These types of solutions are based on individual circumstances; everyone has a unique story to tell.

Kirmser states, "Losing your job doesn't necessarily spell 'doomsday,' especially if you are completely honest with your lender and lay all your cards out on the table. Lending institutions do not want adversarial relationships with their borrowers nor do they seek to become homeowners. At Unity Bank, we have renegotiated many terms and conditions for our home and business borrowers who have been impacted by job losses and hard economic times."

Unity Bank has branches in Hunterdon, Middlesex, Somerset, Union and Warren counties in New Jersey, and Northampton County in Pennsylvania. The bank began as First Community Bank in 1991 with two branches and thirty employees. It now has over one hundred and sixty employees.
For more information about Unity Bank, call Rosemary Fellner at 800.618.BANK(2265), or visit www.unitybank.com