Your Options if You’re Behind on Your Mortgage

For some individuals, initial reactions to lenders’ contact regarding late mortgage payments is to avoid communication entirely until the individuals feel in a better financial position to address the overdue mortgage payments.  However, this approach only lessens the options available to individuals for rectifying and getting out of their late mortgage payments.  In fact, lenders want consumers to keep their homes.  Banking industry statistics note that lenders actually lose an average of $50,000 per foreclosed home.  Instead of looking at lenders as antagonists in personal financial hard times, many individuals will be surprised to find a collaborative approach is more beneficial for both parties.

  • Establishing contact with lenders early on and consistently produces many positive results for late payment on mortgages including:
  • Providing all necessary information on the mortgage debts outstanding and any lien options a lender may be able pursue
  • Ascertaining the timeframe of a mortgage debt from being in default to facing foreclosure
  • Offering financial assistance and other repayment options
  • Persuading lenders of individuals good-faith and collaborative intentions as well
  • Be weary of anyone claiming to be a foreclosure "expert", as there are many for-profit foreclosure scams that do more harm than good
  • Avoiding late fees and other fines for loans debts in default
  • Preventing commercial collections agencies from overtaking individual debt collections process

Options for Individuals under Late Mortgage Payment Pressure

Falling behind on mortgage payments is not necessarily a bad thing in itself, if proper actions are taken early on to obtain the best possible solutions to rectifying these debts.  For many consumers, the assistance of a real estate attorney is beneficial in not only reviewing the existing mortgage agreements and laws in a given state, but also, negotiating solutions for late mortgage payments and preventing the next step that lenders usually take, which are foreclosure proceedings. 

Some suggested foreclosure prevention options that will help also solve late mortgage payment problems include:

  • Mortgage Debt Repayment Plans- Lenders may offer a repayment plan that is tailored to individuals’ specific financial situation and accounts for rectifying missed payments over a period of time in the future.  For this reason, communication with lenders early on is essential.
  • Forbearance- Forbearance is the process of lenders allowing for payment reduction or suspension for a period of time to allow for serious, documentable, and communicated hardships in income, with the expectation of this income to return.  After the forbearance period, homeowners will be expected to make consistent payments as usual in addition to those missed payments in the months previous. 
  • Loan Adjustments- Loan modifications occur between homeowners and lenders and allow for one or more terms of the mortgage contract to be altered, which allows homeowners a better chance at repaying the mortgage debt in a timely manner.  Potential adjustments to loan include interest rate modification, lengthening the life of the loan, or consolidating the remaining balance of outstanding loan debt.
  • Reinstatement- For mortgages that are in default or facing foreclosure, homeowners can reinstate their mortgages to good standing and save their home via paying off the entire-past due mortgage amount and the associated late fees. If future payment of the loan obligations will be manageable for individuals, this the most ideal solution.

Last Ditch Options for Addressing Late Mortgage Payments

A number of options are available that will address the issue of outstanding mortgage debts, but that will involve the loss of a home or property.  Rather than risk foreclosure proceedings that may or may not leave consumers will revenues to find another dwelling place, individuals have several last resort options including:

  • Private sale of their home- This strategy can allow individuals to get the most out of their home’s value, while still maintaining some level of control over the process of the home being sold.
  • Bankruptcy- Bankruptcy is assuredly a last ditch effort, however, may be an applicable solution offering individuals the fresh start they desire. 

These options, both last resort and the others above, are applicable depending on the offers from a given lending institution and their loss mitigation, or foreclosure, department.  Additionally, each state possesses specific rules, laws, timelines, and guidelines for determining when late or defaulted mortgage payments are candidates for foreclosure proceedings.  A real estate attorney can assist clients worried about foreclosure, counsel them on their rights, and represent clients in all action necessary to preventing foreclosure.

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