Lose Your Job? Skip a Mortgage Payment or Two

You’ve probably heard of the car companies that are offering job-loss protection to induce new car sales: buy a car and if you lose your job in the next few months you can return the car. Some homebuilders have offered job loss payment protection plans too, offering employment assurance programs to spur sales. Now Uncle Sam is thinking about getting in on the act, and is considering leaning on lenders to allow homeowners who lose their job skip some monthly mortgage payments.

With unemployment now above 12% in states like California, Nevada, and Michigan, it’s easy to understand the political appeal of such a proposal. It’s less clear why loan servicers would be willing to do this. After all, they have a contract with the borrower which says they’re owed their monthly mortgage payment. From the lender’s perspective, it’s not their problem whether or not the borrower has a job. As one of Tony Soprano’s guys might say when collecting a debt: “Tell it to someone who cares.”

Alas, despite what you may have read, lenders aren’t bad people. They empathize when their borrowers hit hard times. However, it’s not altruism that’s driving their interest in this potential program. It’s the realization that banks don’t want to foreclose on any more homes than they have to. A bank would much rather have their borrower fall a few months behind on their mortgage, or modify the loan, than foreclose on the home. It’s still too early to know whether the proposals being considered will go into effect, but the advice for now is clear: if you hit hard times and are struggling to pay your mortgage, pick up the phone and call your lender. It’s a difficult call to make, but it just might allow you to keep your home.