In this recession, don’t wait to ask for help

Telling strangers you need help isn't easy. We talked about that in a recent post on leveling with your kid's college about your financial woes.

The stakes are higher, though, when your struggles put your home at risk. Waiting to ask for help is a big mistake many people continue to make in this recession.

Minnesotans who've never asked before for help from the government or their bank or any institution are being hit especially hard -- people like Kristine Holmgren.

Holmgren's been struggling since October 2008 when she lost her job working for a non-profit. With her unemployment benefits running out, she called her lender a few weeks ago to see if she was eligible for any kind of help.

What she heard shocked her: There was little they could do at this point because her unemployment was running out.

"He told me had I called as soon as I was unemployed, I would have been eligible for a complete modification of my loan. I could have reduced the entire loan," said Holmgren a source in MPR's Public Insight Network from St. Paul.

The mortgage company told her she had to have nine months of unemployment ahead of her to be eligible for a complete modification. "They asked why didn't you call us right away and I said I didn't know. The only reason I called at all is I wasn't sure how I can make it work."

Holmgren wanted us to tell her story, hoping other Minnesotans don't try to tough it out without seeking help.

This phase of the housing crisis is hitting "homeowners that have never had to seek help before. They don't know where to turn," said Ed Nelson with the Minnesota Home Ownership Center, a non-profit group that's been busy trying to help people keep their homes.

"We're eternal optimists, especially in Minnesota. We think, 'I will resolve this problem before it gets too far. I'll find work. I'll be able to find a second job to make the payment.'"

Most homeowners, he added, wait until they've fallen behind or unemployment runs out, or they've exhausted every penny and there's nothing left to do. We tell homeowners to seek help sooner rather than later. If they wait until they're almost out of unemployment benefits, most banks won't renegotiate."

Holmgren said she was offered, and took, a six month loan modification.

"It's a payment deferral agreement. I'm paying 70 percent of my mortgage payment. It's going to help me a lot but it's going to be for six months. At the end, the lender will review my loan to see if other aid can be offered."

She hasn't missed a payment but says she was told the deferral plan will still hurt her credit score. The mortgage company still reports her as late and she'll be charged a $50 late fee each month. That will be reported on her credit score and the deferred amount and fees will be added to her mortgage balance.

"I thought about it for a couple of weeks. I've never not paid my mortgage on time. I'm saving $60 a month and $60 a month will pay for all my utilities except my Xcel bill."

An ordained minister, Holmgren believes she'll be able to keep her home. She has grown children who are supportive and able to help. She's taken in renters and that covers the mortgage. "My challenge is to come up with an income."

Looking back, she says in February or March 2009, she got a call from her lender saying she might qualify for a modification. "I said 'I don't think so, I'm unemployed.' This person said you don't know. I said it wouldn't work because I'm not working. I stayed on the line for 20 seconds and hung up."

Nearly 62 years old, she says she and other friends who've lost their jobs are "just hunkering down for a new lifestyle" in the recession.

"I have a lot more than most people and I'm thankful. But it's so stressful. I really do believe that on the other side of this is a new whole pile of wisdom on what it means to be a human being."

Help for Homeowners:

The Minnesota Home Ownership Center has lots of resources and help for people struggling to keep their homes.

Making Home Affordable is a site with links to the federal aid that's available.

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