American mortgage debt is at an all time high. Changes in local job markets, tax and insurance rates, and adjustable rate mortgages have caused millions of Americans to make a late payment or skip a payment on their mortgage. If you are unable to make your house payment this month there are still options available for you to keep your home, keep your payments current, and avoid foreclosure.
Your mortgage company can help in several ways, but the key to keeping your home and your credit rating is to act early, say lenders, counselors, and attorneys.
The companies to whom you owe thousands of dollars are in the lending business, not the property business. In a housing market where prices are stagnant or declining and homes are hard to sell, a bank may have a vested interest in helping you keep your home.
If you think you’re going to miss your next house payment, call your lender or the company that services your mortgage - where you send your payments - before you’re late, ask if they can work something out before you’re in the midst of a financial crisis.
The company you need to contact to help you out of your problem may not be the lender, but rather a company that services your mortgage. If you anticipate payment problems or if you have the problems already, contact the company to whom you make your payments. If you are unsure of what company to contact, check who originally made your loan, whether a bank, a mortgage bank or a mortgage broker, and they may be able to put you in touch with the right people.
If your payment is due on the first of the month, you technically are delinquent on your loan the next day, though late-payment fees usually don’t apply until the 15th or at the end of your grace period. Keep in mind that your “grace period” is only the period of time given before late fees apply – your grace period does NOT override or excuse a late pay.
Most lenders don’t send notification out (of delinquency) until after the 30th, after 30 days they report (the delinquency) to the credit authority. Most lenders don’t start any foreclosure procedures until after 60 days at the earliest. At that time, the homeowner will be mailed a letter that says they have five days to bring the loan current or make some kind of arrangement to make their payments.
There are several arrangements you can make: Forbearance is an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies may consider forbearance when you can show that funds from a bonus, tax refund or other source will let you bring the mortgage current at a specific time in the future.
A reinstatement occurs when you pay your mortgage company the total amount you are behind, in a lump sum, by a specific date. This is often combined with forbearance.
A repayment plan is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
A loan modification is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable. Common loan modifications include adding missed payments to the existing loan balance, making an adjustable-rate mortgage into a fixed-rate mortgage and extending the number of years you have to repay.
Lenders have different policies, but the general trend is to work out a solution with the borrower. If the customer has a legitimate reason for not making their payments, lenders may work out a program and defer their payment. If, for instance, the bank agrees to defer your next two payments, that amount will be added to the principal of your loan.
If the customer says they need to run a month behind in their payments, a bank may work with that to keep it from affecting their credit situation. It is best to be proactive in these situations and contact the bank in a timely manner, most of these arrangements must be made before the payment is 30 days delinquent.
Don’t wait until you’ve missed your payments to contact the bank! There are plenty of options and most lenders will work with the borrower to find a solution that is in everyone’s best interest.