Foreclosure and bankruptcy

Back in 1991, when the economy in Massachusetts collapsed, my husband and I lost our home. We thought we were deeding it to the bank, but the bank recorded the title transfer as a foreclosure, even though they did not have to fight us in court.

Here's what happened. In 1988, my husband lost his executive job as a property manager. He held a series of retail jobs while he interviewed with commercial realty companies for another property-management job. Within a year, many of the realty companies he was interviewing with were out of business. Then in 1990, I lost my job. By then, Massachusetts had lost 125,000 jobs in 12 months. We couldn't find jobs that paid as well as the ones we'd had. And, my husband was showing some very alarming signs of mental duress -- we thought it was depression, but it turned out to be early-onset Alzheimer's. So in the spring of 1991, already several months behind in our mortgage payments, we moved in with my mother in NJ, found new jobs here and volunteered to deed our Massachusetts home to the bank.

I should point out that the home was no longer worth the balance on our mortgage. But we would've stayed til the real-estate market bounced back if we could have. Our house was across the street from the ocean, and we loved it. We were looking forward to raising our son there. I still look back on that home as the best one I ever had.

We left because the economy collapsed and our resources collapsed with it.

A lot of people are afraid this is going to happen to thousands of people in New Jersey. I hope it doesn't. But foreclosures are up dramatically, and if the economy really does go into a recession (many people already believe it has), there will be a lot of people out of work and unable to make payments. This is in addition to the folks who have subprime mortgages that are resetting to monthly payment amounts that they can't afford.

Last week at RealEstate Connect, an annual conference about the real-estate industry hosted by Inman News (www.inman.com) in NYC, NYU professor Nouriel Roubini made some dire predictions about the national economy. He said we're in a systemic financial crisis that is severe and massive. "It's going to take years to adjust," he said.

So what do we do about it? I don't have answer. I know personally that I am spending less money, trying to pay down the credit cards and hope for the best. I've delayed needed home improvements.

But if you find yourself sliding toward foreclosure or bankruptcy, what should you do?

Experts say that it's smart to approach your creditors early and see what you can negotiate with them. Perhaps you can get new terms. Perhaps you can offer your mortgagor equity in your home in exchange for patience with your inability to make all the payments.

Jack Guttentag, who writes our Mortgage Corner column on Sundays, has had some good advice about how to negotiate with your mortgagor. You can reread some of his stories by becoming an Inman News subscriber and going here.

We run other advice from banks and Realtors in our Sunday Real Estate and Friday HomeGuide sections. If you would like to have copies as we publish them, e-mail me at pmackenz@c-n.com">pmackenz@c-n.com.

The important thing is to get pro-active. Believe me, I know the shame of falling into a financial hole. To this day, I have phobias about money because of the emotional stress we went through 18 years ago. But the stronger you can be in championing your own cause with your creditors, the more likely you are to fare well in the long run.

Hang in there.