Should Retirement Savings be Used to Avoid Foreclosure?
It’s a fine line:...If you are concerned that a lifetime of savings, or whatever is left that is, including your retirement accounts, should be accessed to keep your mortgage payments current.
When you are receiving collection calls from your mortgage lender and are being told that foreclosure proceeding can be put on hold as long as you continue to pay and that you use all available savings plans, retirement accounts and loans against retirement savings plans in order to accomplish the goal of saving your home. Clearly, an attorney's role is to counsel and advise what efforts and actions you may undertake in the loan modification area.
Some questions that might be running through your mind:
- Where monthly income is insufficient to pay the monthly debt, where do I draw the line on depletion of a lifetime of savings?
- How is it possible to overcome a situation where the house is well over leveraged and there is negative equity?
- Should I consider depleting my lifetime of savings and retirement assets?
There certainly are good reasons to protect your hard earned equity. If you have substantial equity in the house, many would counsel and advise to use all assets. However, is it worthwhile to enter into a temporary interest rate concession where the home has a negative equity problem? We anticipate several points of discussion along these lines. Loan modifications are designed for homeowners with hardships and certainly this situation qualifies for further discussion...
Homeowners should definitely consult an attorney before depleting their retirement savings. Most homeowners do not know the lender representative that are demanding payment, nor have a call back number or the name and address of the lender representative and therefore can not seek to discuss these demands with the lender caller again. The bottom line here is to avoid making a bad decision without thinking through the consequences and the alternatives. The lender does not expect the homeowner to have an attorney on your side. In fact we see many lenders now soliciting their homeowners with bright and bold advertisements that a 3rd party or attorney is not necessary. What the lender fails to mention is that the first option they choose is to hire experienced and aggressive foreclosure attorneys to take your house back as quickly as can be accomplished. In our daily routines and consultations, we see the lenders overwhelmed and many times unable to adequately handle the volume of defaults that presently exist.
The modification process is not a collection practice in disguise. It is a clear and recognized alternative that should be explored before the line is crossed and a lifetime of savings and retirements plans are used to clear arrears.
