A Story from the Front Line of the Credit Crisis

One my favorite parts of my job is having the opportunity to communicate directly with people in need of credit help.  It's a complicated financial world out there, and I'm glad to share what I've learned from 7 years in the credit industry.

Some of the recent emails that we've received are hard to read, though. There's not much helpful advice you can offer someone trapped between credit card debts and mortgage payments. Here's one such story:

I am little confused about what I need to do to get my current mortgage lender to help me in my current financial "crisis".  I tried refinancing my first and 2nd  mortgage, but due to 100 point drop in our credit score when payments were late for few months when I lost overtime; we didn't qualify for refinancing.  Since we have had our mortgage we have never been late on any of our payments, which has been a little over 2 years. 

What stunned me most was the answer that the mortgage company gave me about getting help, “in order for us to help you, you need to default and go into foreclosure on your loan” I asked her to repeat what she said; I was flabbergasted. 

What do I do, I cannot make ends meet paying the mortgage and all of our other bills.  We are on a fixed income, we work our but off to make ends meet, and that doesn’t happen each month.  Obviously it didn’t help for us to late on credit card payments, so should I be paying them off and not paying the mortgage so I can go into default, thus killing my credit even worse than it already is? 

We only took this ARM loan to get into the house, we were told we needed to make our credit better and in two years we could refinance for a lower payment and lower interest rate. The value of house dropped and now we are so stuck.  I am so confused, I don’t know what do.

Although this homeowner is in a terrible situation, she's hardly alone. We've received dozens of emails where people are facing foreclosure, bankruptcy or credit ruin. For this reader I recommended looking to three sources to help determine her options: HOPENow, bankruptcy and credit counseling. The only thing that's certain is that there are some tough decisions to be made ahead.

Emily Peters – Credit.com's personal finance expert and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Comments

[Janine Cain]

I am in almost the exact situation as this poster, and I thought I was the only one!! I am at the end of my rope--I can't get a mortgage for a less expensive home (believe me, I have tried!) because I am late on my CC in order to stay current on my mortgage. I thought paying the mortgage first was the right thing to do!!My mortgage company refuses to do anything,(I have been telling them I am in trouble for months) saying I am not behind. I am literally stuck in a catch-22. I have about 50 thousand in equity, (dropping daily) but because of the late cc, no one will refinance me or finance me. I could pay off the cc debt if I could sell the house, but my real estate agent says she doesn't even know if we could find a buyer who could qualify for a mortgage due the the tight credit. And who wants to sell their house just to jump off the cliff and hope eventually someone will finance me? Will I even be able to get a rental with late payments on my credit report?
Just glad to find a place where my story is not unheard of. I will keep checking back to see if anything EVER happens that will help me before I end up becoming another sad statistic.