It’s the 16th of the month and, if you’re reading this and you’ve missed paying your mortgage payment by the 15th of the current month, hopefully this will provide you with some guidance as to the next steps you need to take.
Being late on your mortgage is unlike being late on a utility bill, phone bill, etc where you can catch up if you get behind one month. Mortgages have an acceleration clause, which requires that all missed payments and late fees are paid at once in order to return the account to good standing.
If you missed paying this month’s mortgage payment, you can still pay the current month plus the late fee to return the account to good standing. However, if you miss paying the mortgage before the next payment is due (the first of the following month), you will need to make two mortgage payments at the same time, plus the late fee. Miss three payments, you’ll need to make three payments. Four payments… you get the idea.
After missing two missed payments, your mortgage lender can start foreclosure actions against you. That process will involve calls from their collections department, letters in the mail, and eventually the sheriff will serve notice at the property of a foreclosure hearing before a magistrate at the county courthouse. Before it gets that far, you should speak with your lender about various loss mitigation options that may be available to you, depending on the type of mortgage is on your home
A forbearance is typically used with government-insured mortgages (FHA, VA, USDA) as a tool to bring a delinquent mortgage account current. Forbearance takes your missed payments (principal and interest), penalties and fees, bundles them into a loan called a Partial Claim and resumes your mortgage in good standing. It can be helpful if you found yourself temporarily out of work or without pay and became delinquent on the mortgage. There is no payments due each month on the Partial Claim balance however it is due in full when the mortgage otherwise would have been paid off. For example, if your mortgage was for 30 years and 5 years in, you had a Partial Claim in the amount of $50,000 but resumed payments, in 25 years, you will owe a lump payment of $50,000. Also, if you sell your property, the Partial Claim will be due at that time.
A Mortgage Modification is similar to forbearance but it allows for an adjusted payment that can include the missed payments. Others utilize the forbearance approach of a silent second mortgage to handle missed payments.
A Short Sale may be another option if you owe more on your property than the fair market value and your intention is to sell. If you wish to remain in your property, mortgage modification and forbearance are your best options.
Communication is key with your lender. While it may be embarrassing and a difficult conversation to have, speaking with your lender early on and often about the circumstances that you find yourself in can be a best solution to preventing a foreclosure.
One final piece of advice would be to inquire with your state’s housing finance agency as to what programs they may have to help get back on the right track if you sense that you may fall behind on your mortgage.