Late payments and default on your mortgage

If you’re facing financial problems and are having difficulty making your mortgage payments, contact your lender or loan servicer right away to see what your options might be. Because if you don’t pay your mortgage on time, or if you pay less than you owe, the consequences can add up quickly.

For example, your lender or servicer may add late fees and additional interest to the amount you already owe, making it even harder for you to get out of debt. Even a single late payment can negatively affect Your credit score affects your chances of getting a new loan or refinancing your current loan and also has an impact on the interest rate you’ll be charged.

After you close on your home loan, you make monthly payments to your loan servicer. The lender is the company that lent you the money, and the administrator is the company that handles the day-to-day management of your account. Sometimes the loan grantor is also the servicer. But usually, the lender hires another company to serve as an administrator.

When you fall behind on your mortgage payments, the lender or servicer can declare your loan delinquent and serve you with a default notice. Failure to pay is the first step in the foreclosure process.

Once your loan is in default, the lender may charge you for “default-related services” to protect the value of the property, such as inspections, lawn mowing, landscaping, and repairs. Those services can add hundreds or thousands of dollars to your loan balance.

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If you can’t catch up on missed payments or find another solution (link to that section), your lender or loan servicer can take legal action to sell your home in foreclosure.

This process can also add hundreds or thousands of dollars to your loan in other costs, and as a result, make it even harder for you to keep making payments, catch up on missed payments, and keep your home. In many states, in addition to losing your home to foreclosure, you may also have to pay a “deficit judgment.”

That payment is the difference between what you owe and the selling price of the house at the foreclosure auction. A foreclosure will make it harder for you to get credit and buy another home in the future.

How to deal with default on your mortgage and foreclosure

The longer you take to contact your mortgage servicer, the fewer options you have. If you’re having trouble paying your mortgage, don’t wait for your default or delinquency notice to contact your mortgage servicer, the company that receives your monthly payments.

Consider contacting a free housing counselor. You can get free, legitimate help from a counselor who can explain your available options. Before you speak with an advisor or counselor, learn how to spot and avoid mortgage and foreclosure counseling scams that promise to stop foreclosures but end up stealing your money.
Make a list of your income and expenses. Be prepared to show that you are making a good faith effort to pay off the mortgage by reducing other expenses. Answer these questions:
- What happened to cause you to miss one or more payments on your mortgage?
- Do you have any document to justify the reason for your late payment?
- How have you tried to solve the problem? Is the problem temporary, long-term, or permanent?
- What changes do you see in your situation in the short and long term?
- What other financial problems may be keeping you from getting up to date on your mortgage payments?
- What would you like to see happen? Do you want to keep the house?
- What type of payment arrangement might work for you?
Check your mortgage servicer’s website. See what options might be available to people in your situation. Read more about ways to avoid foreclosure.
Consider borrowing from your life cover policy. It’s best to get one as early as possible for unexpected occurrences and financial mishaps, just like foreclosure threats.
Contact your mortgage servicer to discuss ways to resolve your situation and avoid losing your home. The service is more likely to delay the foreclosure process if you are working with him to try to find a solution. If you can’t reach the administrator the first time, keep trying.

When dealing with your lender or servicer, it is important that you do the following:

Keep notes of all your communications with the servicer or mortgage lender.
Write down the date and time of any contact, whether they met in person or communicated by phone, email, or mail, the name of the representative you dealt with, what was discussed, and the results. Follow up your phone conversations with a letter.
You can send a follow-up email, but you should also send a letter with the tracking information via certified mail, “return receipt requested,” so you can document what you received from the administrator.
Keep copies of the letter and all attached documents.
Comply with all deadlines indicated by the administrator.
Stay in your home during this process. You may not qualify for certain types of assistance if you move. If you choose to rent your property, make sure the rental income is enough to help you keep up with your payments.

It is in your best interest to calculate the amount of mortgage amortization on your home. To do this calculation:

Call a professional appraiser to get the appraised value of your home. You will have to pay for the appraisal service unless you have had an appraisal very recently. Or you could calculate the fair market value of your home based on the sales of other similar homes in your area (known as “comps”).
Calculate the total amount of any loans you’ve taken out using your home as collateral (for example, your mortgage, a refinance loan, or a home equity loan).
Subtract the full amount of the loans from the appraised value or fair market value of your home. That number is the value of your mortgage amortization or equity.

Late payments and default on your mortgage

Have trouble paying your mortgage or facing foreclosure?