- You must wait until mortgage default before you can negotiate a bailout. Your full mortgage payment is due on the first of each month. After 30 days of missed payments, the mortgage falls into default and the foreclosure process begins with the 150-day pre-foreclosure stage. At that point, you would then contact your lender and attempt to secure a mortgage forbearance or bailout.
- Mortgage forbearance is more ideal in response to temporary financial distress, which may arise due to hospitalization. With forbearance, your regular payments could be reduced or suspended for several months, but terms of your current mortgage remain the same. After forbearance, you would repay the missed payments in installments alongside your regular mortgage note.
- A mortgage bailout describes permanent changes in home loan structure that should result in an affordable ongoing payment. For example, you may negotiate a mortgage bailout to reduce your home loan principal and interest rate. In some cases, the mortgage bailout will simply offer an extension of your loan term. For example, you may owe $100,000 in your 12th year of a 30-year mortgage. Through a mortgage bailout, the lender could grant you another 30 years to pay off the remaining $100,000, instead of paying it down within the next 18 years, which would lower your monthly payments.
- You will put together a loan modification proposal to argue your case for a mortgage bailout. To do so, you will gather together copies of your recent bank statements, loan documents and pay stubs. The bank will analyze these financial statements to ensure that you have exhausted almost all of your financial resources, while attempting to stay current on the mortgage. You should also have the bank appraise the value of your home as part of the proposal. If your home has lost significant value, you may owe more on the mortgage than the property is actually worth. In response, the bank could write down your mortgage principal to match the value of your home. Be advised that the bank operates under its best financial interests and may reject your loan modification proposal for any reason.
- You would put the home up as a pre-foreclosure sale, in case the bank rejects your loan modification package. As a distressed seller, the home may require small repairs because you lack the funds for upkeep. To attract demand and close a deal quickly, you should offer the home at a 10 percent price discount to comparable real estate. The bank may seize your home and auction it off if no mortgage settlement agreement or home sale has been secured after 180 days of missed payments.