Understanding What a Mortgage Delinquency Is
Life happens fast, and before you know it, you may be facing mortgage delinquency. This is what happens when you don’t make your payment within 30 days of its due date. At this point, the mortgage servicer (the company you make payments to) must report you to the credit bureaus.
What Happens to a Delinquent Mortgage?
Mortgage delinquency can trigger a few different events, including:
- It will hurt your credit score since late payments are reported to the credit bureaus. This can stay on your credit report for up to 7 years.
- Fees can add up fast. For each late payment, you’re charged a late fee. You may also have to pay other legal fees (e.g., foreclosure, property inspection fees, maintenance fees for a vacant property).
- You may lose your home to foreclosure if you’re more than 120 days late on your mortgage payment.
What do You do with Mortgage Delinquency?
Before missing a payment you should reach out to your mortgage servicer (the company you make your payment to). They may have several ways in which you can deal with your mortgage delinquency, including:
- You can agree to forbearance, which will temporarily pause your mortgage payment so you can work through your financial hardship. This is typically the first option, especially if it’s only a temporary hardship. Eventually, you’ll need to pay back any payments that were due during the pause have to be paid back. It’ll still negatively impact your credit, though, so it’s still a good idea to continue making as much of your payment as possible.
- See if you qualify for deferral (a.k.a, partial claim) once your forbearance is done. This will allow you to delay some payments until you refinance, sell your home, or pay off your mortgage.
- Establish a repayment plan with your lender so that you can pay some extra on your mortgage each month until you pay off your past-due balance. Typically, these repayment plans are 1 – 3 months. They’ll make your payment significantly higher than a regular mortgage payment which is why they’re difficult to qualify for.
- Modify the original loan before you face mortgage delinquency. This makes your payment more affordable by modifying the original loan terms (e.g., length of time it takes to pay off the loan, interest rate). While these impact your credit, they won’t impact it as much as a foreclosure.
- Reinstatement is the fastest way to resolve mortgage delinquency. This requires you to pay back the full amount that’s past due when your forbearance ends. Doing so keeps your mortgage on its current loan term and interest rate. It also won’t impact your credit any further.
- Sell the house In a short sale. This is a sale whereby the lender agrees to take less than what you owe on the mortgage so that they can get some money and avoid foreclosure. It’s up to the lender to approve the offer and manage the sale, but this won’t impact your credit as much as a foreclosure.
- Deed-In-Lieu of Foreclosure is when you choose to sign the property over to a lender. While you’ll need to meet the deadlines and requirements to vacate the premises, the benefit of doing this is that you can obtain a new mortgage after 4 years instead of waiting the 7 years necessary for a full foreclosure.
- Foreclosure occurs when you’re evicted from your home by the lender who takes possession of it. Lenders will do anything possible to prevent this from happening, but when there’s no other solution, they do occur.
There are several solutions available when you’re facing mortgage delinquency. For help with choosing which one of these is right for you, contact us at the Jay Weller Legal Group in Tampa, FL, today.