Saving Grace

Q: "Are there any laws, in the Commonwealth of Massachusetts that allow for a grace period in mortgage payments? Say for example, forgive a couple months payment prior to commencing foreclosure activities, provided the homeowner can prove and actually is pursuing remedies to the situation, e.g., selling the property, etc.?"

A: This is a common question these days.

Today in the immediate wake and occurrence of the mortgage meltdown the last thing a bank wants to do is foreclose on a house. The typical foreclosure will cost a bank around $50,000 when all is said and done. Many banks are negotiating new terms with their clients rather than foreclose. Call your bank and see if there is a way to renegotiate your mortgage. This is very common in today's market. Please note that some lenders will not negotiate new terms.

We are not aware of any laws that grant leniency to homeowners for unsatisfied or late mortgage payments. Again, the best place to start is your bank. Using a short sale could be a solution. A short sale is when the house sells for less than the mortgage. Right now, if your bank grants a short sale, one of two things happen: 1. You owe the bank the difference in a separate loan usually with a monthly payment similar to a car payment. 2. The bank forgives the difference, however, you will be exposed to a capital gains tax on the difference. Since the bank granted you this amount it is considered a gain.

You would best be served by calling your bank and asking them about renegotiating your terms. Tell them you are aggressively marketing your home for sale and will work with them to prevent foreclosure. Also, inquire about a short sale. This may be the remedy you need to lower the listed price on your property and compete realistically to produce a buyer. Beware though, some banks record a short sale balance as a negative on your credit.