What to Do When You Lose Your Job and Can’t Pay the Mortgage
Once you’ve bought a home with me, you’re a client for life. Ask my buyers, they can’t get rid of me! I just feel like if you walked into Nordstrom and dropped a half a mil on shoes, they’d probably send a shoe gal with you for the next 20 years. Why should you expect less from your Realtor?
The Client. For this reason, it wasn’t at all strange for me to get the call from my trusty mortgage broker pal, asking me to pull comps on Mr. and Mrs. B’s house. Not infrequently, our mutual clients approach her about refinancing and she’ll ask me for an opinion of value to make sure a refi is somewhat feasible before they get their hopes up. What was unusual about this call was when she said, “Tara, Mr. B just lost his job.”
Now this gave me pause. Mr. and Mrs. B had just bought their home less than a year ago, moving up from a condo to a single family home to get ready to start having kids. They had put down a good chunk of money in a down payment from the proceeds of the sale of the condo and had stellar credit, so they actually had a pretty good mortgage already. However, Mr. B had been at his job for over a decade, and I know he hadn’t seen a pink slip in his future or he wouldn’t have taken on a new, larger mortgage. (This was just at the beginning of the recession, before most of us had realized that’s where we were headed.) But he’d just been given two weeks’ notice and a promise of two weeks’ severance.
No matter how financially responsible someone is, with a 50 percent reduction in household income, it just doesn’t take long for a monthly mortgage payment to deplete a savings cushion. I mean, even Suze O. only advocates a six months’ living expense emergency fund, and I know from experience that (a) most people don’t have that kind of cash in the bank and even if they do, (b) six months flies by really fast if you measure it from mortgage payment due date to mortgage payment due date!
The Workaround. So I ran the comps. And they weren’t bad. Their home had certainly not appreciated the way we’d have expected a year or so earlier, but they did have a few percentage points’ worth of equity. I called her back and discussed the situation with her briefly. They currently qualified for an interest rate about a full point lower than theirs at the time and they had a little equity, so were in a position to refinance with no cash out of their pocket and save a few hundred dollars a month on their mortgage payment.
She’d give them a call to follow up and do the deal if they decided to go for it. But I also wanted to check in with them and offer my assistance. Assistance at what, I didn’t know, but so often, people’s friends tend not to call them when they’re in the midst of the yuck of life. Since I was there at one of their best times, I wanted them to know I was there for them now too. I gave them a ring and we just talked for a little bit. He was upset and very stressed out, but had already moved past being freaked out and into action mode.
He had lined up some part-time consulting work and was spending his spare time looking for full-time employment and scrutinizing their household budget for flab, line-by-line. That spending plan audit was what inspired the interest in refinancing, and it was about to pay off. He had also prioritized, decided what bills he would forego paying if it came down to it and projected that at their current household cash flow, he could make the mortgage for only about 4 more months. After that, they’d be in serious trouble if he wasn’t back to work.
The Result. Fast forward a couple of years. He got a job after being out of work for about 10 weeks. He’s still at work and they’re still in their home. And they are still reaping the benefits from that budget review they never would have done had it not been for his layoff, having now accumulated thousands of dollars in home loan payment savings (and savings on other superfluous expenses!). But they still can’t get rid of me!