What Happens When You Fall Behind On Your Mortgage?

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from New York State Banking Department

A home mortgage is a secured debt.  Secured debt is held against an asset, if the debt is not paid, the asset can be taken.  If you do not adhere to your mortgage agreement, the lender can take your house. 

If you are having trouble, or think you may be facing future payments that you can’t afford, do everything in your power to make up the missed or late payments.  prioritize your mortgage payments.

If you do fall behind and are unable to catch up, then you probably cannot afford the mortgage you currently have and should act quickly.  Contact your lender or loan servicer immediately.  Do not ignore their letters or calls.  Let them know that you are having difficulty and are willing to do whatever is necessary to stay current on payments and keep your home.

This is a general timeline, from late payment to foreclosure, that shows what might happen if you do not communicate with your lender and resolve late payment issues in a timely manner might be:

DAY 1:  A Mortgage payment is missed.

Day 16-30:  A late charge is assessed on payment.  The mortgage servicer will attempt to make contact with the borrower.

Day 45-60:  Servicer will send a “demand” or “breach” letter to the borrower pointing out that the terms of the mortgage have been violated.  The borrower has 30 days to pay the delinquent amount.

 Day 90-105The servicer refers the loan to its foreclosure department and hires an attorney or representative to initiate foreclosure proceedings.  That representative may record a formal notice of foreclosure at a courthouse, publish details of the debt in the local newspaper, attend hearings on the case, etc.

Day 150-415:  The house may be sold at foreclosure or auction.

There are a number of things the lender may consider doing to remedy the situation, such as:

Repayment plan:  The lender may be willing to agree to a repayment plan and split the late payments up and tack them on to future monthly payments.

Loan modificationThe lender may adjust the terms of the loan to make it affordable.  They may lengthen the amortization schedule or lower the interest rate or include the past due amount into the loan and re-amortize the new balance so that you can pay the additional debt back over time.

Short saleThe lender lets the borrower sell the house of less than the outstanding loan amount, takes the proceeds and forgives the remaining debt.

Bankruptcy:  Filing for bankruptcy will temporarily halt the foreclosure process and may force the mortgage lender to accept a more-friendly repayment plan but a bankruptcy should only be considered as an absolute last resort.  Doing so will remain on your credit report for ten years.

If you think that you are in trouble or at risk of falling behind on your mortgage payment or if you decide to sell your home, call me to discuss all the options available to you.  I can be reached at Appleseed Homes, (718)966-4000 or (347)415-5295.






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