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How to Negotiate Late Payments With Mortgage Lenders

by Don Rafner

If you're late with your current mortgage payment, don't panic. Your lender probably won't start foreclosure proceedings. Foreclosure is a time-consuming and expensive process for mortgage lenders. Most use it as a last resort. This could play into your favor if you're struggling to make your mortgage payments on time. If you can prove that you can no longer afford your mortgage payment -- and that is why you are late with your current payment -- you might be able to persuade your lender to modify your mortgage loan to leave you with a payment that you can afford, on time every month.

Calculate how late you are with your mortgage payments. This is important because most mortgage lenders don't start the foreclosure process until you are at least three months behind on your mortgage. And once you fall behind on your mortgage by 90 days or more, most lenders also won't accept a partial mortgage payment. As MSN Real Estate reports, lenders will often begin the foreclosure process if you can't come up with the entire three months that you have failed to pay. And as Realtor.com says, you won't suffer any penalties -- either in the form of charges by your lender or a hit to your credit score -- as long as you make your late payment within 15 days of its due date.

Call your lender once you start falling behind on your payments. The sooner you do this, the more likely your lender will be to work with you on a possible solution. Yes, it is embarrassing and frightening to call the company to which you owe money. But putting off this call might leave you deeper in debt if you can no longer afford your monthly mortgage payments.

Explain to your lender why you are late on your mortgage payments. Maybe you've had a reduction in your working hours or a serious illness that has slashed your monthly income. Write a hardship letter that states the reasons for your late payment and send it to your lender.

Copy any financial documents that your lender can use to verify your loss of income or increase in expenses. If medical bills are preventing you from paying your mortgage on time, send your lender copies of these bills. If your income has shrunk because you've been switched from full-time to part-time at work, send your lender copies of your most recent paycheck stubs. The more information you can provide to support your claims of a financial crisis, the more likely you are to persuade your lender to work with you to provide some form of financial relief.

Ask your lender for any steps you can take to stay in your home. Maybe your lender will agree to modify your mortgage loan, reducing your principal balance, lowering your interest rate or reworking your loan's terms in an effort to leave you with a smaller monthly payment that you can afford to pay on time every month. Or maybe your lender will agree to give you a six-month break from paying your mortgage as a way to give you time to solve your financial crisis. Your lender might even let you make a partial payment to stay in your home. Again, most lenders prefer to avoid the foreclosure process. Your lender, then, might be willing to work with you to keep you in your home.

Consider other options if your lender isn't willing to lower your monthly payment or offer some other form of financial relief. You might try to sell your home in a short sale, a sale in which your lender allows you to sell your home for less than what you owe on your mortgage loan. You might also consider a deed in lieu of foreclosure. In such an agreement, your lender agrees to take over possession of your home and you agree to leave it. Both of these options will hurt your credit score, and you might have to repay your lender at least some of the money that you owe on your mortgage loan, but they do prevent the inconvenience and shame that goes with foreclosure.

About the Author

Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.