The thought of losing your home because you are behind on your mortgage payments is terrifying. Sadly, many Americans are behind on their mortgages and are afraid they will lose their home. Regardless of what caused you to fall behind, you need to know your options so you do not lose your home. The good news is that you can probably keep your home if you are behind on your payments.
What the Bank Wants
The last thing your mortgage lender wants to do is start the foreclosure process if they can avoid it. Filing for foreclosure is a very expensive process and it can be drawn out over a long period of time. But lenders also don’t want to carry loans on their books where the borrowers are not making their mortgage payments. However, if you are only a little behind, the bank would much rather you catch up. Your home won’t make them money the way your mortgage will, so you might be able to arrange a repayment plan.
Most lenders will arrange a repayment plan where you make your normal monthly payment plus a little extra each month until you are current on your mortgage. Making arrangements to pay back your missed payments is one of the ways to avoid foreclosure and keep your home. If you are unable to make any of your mortgage payments going forward, you will need to consider other options such as a mortgage modification.
After the financial crisis of 2008, many homeowners had to modify the terms of their mortgages so they did not go into foreclosure. Foreclosure affects the home values of the whole neighborhood and can contribute to financial instability, so it is in everyone’s best interest for you to recover from a foreclosure scare. According to Dickson Frolich, there are a variety of options for modifying your mortgage, including the government’s Homeowner Affordability and Stability Plan (HASP). HASP targets homeowners who owe more than their home is worth. If a loan modification seems like the best chance for you, start doing your research now.
If you suffered a financial hardship or some other qualifying life event, your lender may offer you a forbearance. A forbearance is when your lender temporarily suspends your monthly mortgage obligation until you work out your financial difficulties. However, you must agree to start repaying your missed payments in a timely fashion once you have recovered from your hardship and you may face some financial penalties such as a higher interest rate.
Keep in mind that just because you are behind on your mortgage payments does not mean you will immediately lose your home. In many cases, your lender will not put you in default status until you are at least 90 days past due on your payment. However, do not ignore the problem. Lenders will start foreclosure proceedings if you fail to contact them and make payment arrangements.