I read a cautionary article in the May 3, 2009 Toledo Blade titled Homeowners tempted to skip payments that considers the real cost of skipping paying a few months of  mortgage payments in hopes of forcing lenders to modify loans.  I'd like to briefly summarize and comment on the article since we all know people who are struggling to make mortgage payments on time and we may be able to be of some help to them.

The federal government does have a new plan called the Making Home Affordable that offers incentives to lenders to modify or refinance loans for homeowners with financial problems.  But, the key is to talk with the lenders early and explain the particular set of circumstances that puts someone at risk for defaulting on the loan. The longer people wait to contact their lenders and the more payments missed really reduces their chances of getting a modification because they have dug themselves too deeply into a financial hole.

Those skipped payments impact on all types of credit making it harder to getting car loans and having credit card terms changed to higher interest rates and lower spending limits.  Cash deposits may also be required for utility turn-ons, cable TV, and cell phone service.

Even if they do skip a few payments, those payments are still owed with penalties and interest charges tacked on.  Worse case scenario is that the home is foreclosed on which really damages credit for many years.  And, now savvy apartment owners are refusing to rent places to people with poor credit.

Best course of action for people in risk of not being able to make those mortgage payments is to jump on the phone and call their lenders.  They will initially have to talk to the debt collection department, but should ask to talk with someone in the loan modification department where someone has the authority to authorize a loan modification.