Missed payments on your mortgage usually signal to the lender you may be headed for default. Before you give the lender a reason to start foreclosure proceedings, seek alternatives such as loan modification or a payment plan to catch up. Getting the lender's attention to set up a payment plan or loan modification will take quick action and effort, proof you can actually handle a new agreement and a bit of diligence.
Weighing The Cost Of Missed Payments
Catching up with missed payments means more than just getting current on the principal and interest costs. In many cases, the lender may add on late payment penalty fees and additional interest. If you live in a state which allows the lender to foreclose on you outside of the court system, your swift action is the only way to prevent a foreclosure from happening before you can get your bearings and create a plan of action. Nonjudicial foreclosures can happen in a matter of months if the lender is motivated to remove you from the property. The moment you think you'll have problems making mortgage payments on time, it's time to contact the lender.
Catching Up Means Taking Action Quickly
Communicating your inability to pay your mortgage or your intention to catch up on missed payments means contacting the lender as soon as possible to arrange a modification of your loan. If foreclosure proceedings have not started, you have the right to request a mortgage modification and prevent the lender from initiating a foreclosure as a result of the Consumer Financial Protection Bureau's new rules around limiting lenders performing "dual tracking," or pursuing foreclosure and allowing you to modify the loan at the same time.
Loan Modification Options
Before speaking with you lender, arm yourself with key pieces of information and a clear determination of your goal. Have your loan information, current income and employment information. Additionally, be prepared to share your current situation with the lender and why you've missed payments. If the lender has a formal loan modification program, it will take a minimum of 30 days for the lender to review your loan modification request application and accompanying documentation. The lender may choose to modify your loan by lowering your interest rate, extending the length of the loan and number of payments or, in rare cases, forgive a portion of the loan.
Foreclosure Avoidance Efforts Can Work In Your Favor
With the government-sponsored Making Home Affordable and lenders creating their own loan modification programs, you stand a good chance of coming up with an alternative to foreclosure if you act swiftly and in concert with the lender. Several states require the lender to sit down with you in mediation to avoid foreclosure if you become delinquent on your loan and in default. In some cases, it may not be easy to find the right person with your loan servicer or mortgage company. Fannie Mae's Know Your Options and the Homeownership Preservation Foundation offer online resources and access to HUD-approved housing counselors who can assist you at no cost or at disclosed reduced rates to get your loan modified.
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