It’s been a difficult couple of years in the economy and with unemployment on the rise, a growing number of homeowners are struggling each month to make their mortgage payments. Millions of people in this country face the dilemma of draining their savings and emergency funds in order to stay current on their payments. With the new program coming into place to help troubled homeowners, this decision is not as easy as it once was.

Most of the government programs that are either proposed or already in place are only available to homeowners who are behind on their payments. Many homeowners are willing to miss payments in order to qualify for programs that will modify their monthly payments and help them to stay in their home.

It makes sense in some cases to miss loan payments that you have the money to make-if you have $5000 in savings, no job or job prospects, and a $1500 monthly mortgage payment, you could either spend your savings to make the payments for three months or keep the money and fall behind earlier on your payments. Your credit will take a hit whether you miss the payments now or later, so you might as well keep the cash, right?

The answer is maybe-most of the programs people are counting on to bail them out are reserved for people who don’t have sufficient liquid assets to make their payments. The Treasury department has been vague when it comes to how they will determine which borrowers really don’t have the money to continue their monthly payments. Will they require people to spend everything in their savings accounts first? What about retirement plans and 401K’s? Since we don’t know the answers to these questions, it’s currently up to individual lenders to determine who qualifies to have their loan modified.

Critics of the proposed homeowner bailout programs are upset because they feel like irresponsible homeowners are being rewarded for falling behind on their payments. If times are tough for a homeowner but they are making sacrifices to make their monthly payments, are they less deserving of help than those unwilling to sacrifice their quality of life to the same extent?

There is no easy answer here, of course. For some, it becomes a moral question, and they feel an obligation to do everything they can to make the payments that they promised to make. For others, if a system is in place to help distressed homeowners, they feel ok about putting themselves in a situation where they qualify for certain programs. The risk these borrowers take is that if their application for loan modification gets denied because of other assets they own, their credit will take a hit for the missed payments and they may still have to make their full payments.

There are pros and cons on both sides of the debate, but it’s important to talk to your lender to understand the details of any program you may apply for.

If you enjoyed this post, make sure you subscribe to my RSS feed!

Tags: Bailout, credit, mortgage

• Mortgage Modifications Come In Various Shapes and Sizes
• Mortgage Interest Rates:To Lock or Not To Lock?
• How Much House Can You Afford?
• Reasons to Consider Refinancing Your Mortgage
• Pros and Cons of Reverse Mortgages
• Avoid Costly Mistakes When Buying A House
• Should You Use A Mortgage Broker?
• 4 Alternatives to 401K Contributions Without a Match