Missing a mortgage payment or two puts the homeowner at risk for a home foreclosure if they fail to cure their arrears fairly fast. By the time a consumer misses three or more monthly mortgage payments they move to a stage where they should turn from self help to professional help and come to grips with the fact that losing the home to foreclosure lurks as a very real and grave danger and that time to save their home remains fleeting. This FAQ outlines how to react once the mortgage reaches three months past due. Part I of this series dealt with missing one or two mortgage payments. No matter how late your mortgage payments might be at this time, you will learn the most by reading both sections.
Q. I missed two mortgage payments already and it looks like I will be three mortgage payments in arrears soon. Three mortgage payments behind, four mortgage payments behind, does it really make much difference?
A. Yes! As much trouble as you face catching up on your mortgage, once the bank starts the foreclosure process things get dramatically worse.
Q. When might I expect this foreclosure process to start?
A. No specific rules or laws dictate an exact date when a lender must initiate a home foreclosure, but the common practice followed in the majority of cases means you must expect the foreclosure process to begin a few days after you miss your fourth mortgage payment.
Q. Like I said, I only missed two mortgage payments so far. Why sound the alarms and call out the cavalry now?
A. It might strike some people as odd, but this narrow gap of time between one or two months late and four missed mortgage payments usually represents the very best time to avoid foreclosure and lower your mortgage payment.
Q. How does this earn the title of the perfect time reduce a mortgage payment?
A. While I might love to see people deal with their mortgage problems head on before they even miss one mortgage payment; some banks do not take your situation seriously or follow corporate policies that prohibit them from allowing a mortgage modification until the homeowner misses one or two payments.
Q. Than does it follow that I should get as late as I can before I start to talk to the bank for my best chance at lowering my mortgage payment and stopping home foreclosure?
A. Certainly not, remember you want to establish a long term solution for your mortgage trouble BEFORE the bank starts foreclosure proceedings.
Q. Is that because once foreclosure starts nothing stops the process?
A. Not at all, in fact a chapter 13 bankruptcy stops a foreclosure even minutes before a foreclosure, not that you ever want to let it get that close.
Q. Why not wait as long as I can. Procrastination in this situation provides an easy and inexpensive solution?
A. For one thing the longer you wait to get mortgage assistance the more options expire until only filing chapter 13 bankruptcy remains, and since many people lack the income to make bankruptcy work as a method for avoiding foreclosure ignoring the problem until the last minute rarely counts as a smart idea.
Q. So timing takes priority over other issues in a general sooner the better way?
A. Not in a just in a general way, this specific period that occurs at 60 to 120 days late on mortgage payments rates as highly critical. Not that you want to let yourself get 60 days late on purpose, but once you reach this point you must pay attention and step up mortgage assistance efforts in a big way to realize you best chance to save your home
Q. Does something happen at 120 days late that makes it any different than 121 days in arrears?
A. Often yes, and significantly different even if it's at 130 or 150 days. First off and shocking to some people, it's at this stage that the bank refuses to take your payments even if you get together the money to send them.
Q. What? The bank will turn down my money?
A. Somewhere deep in that huge pile of mortgage documents you signed lurked something called the mortgage acceleration clause that says if you get too far behind on your mortgage payments the bank retains the right to call your note and make the entire amount owed due at once. When this happens the bank no longer accepts monthly payments instead demanding all of your arrearage in full.
Q. So I must pay the bank 100% of my back payments or they will accept nothing and just continue the foreclosure proceedings?
A. No, it's worse than that, because at the same time the bank calls your loan they phone their lawyers who start all of the foreclosure paperwork including a bill to you for their legal fees to foreclose on your home.
Q. I need to help pay the bank's legal fees? Where did they get that right?
A.Once again you gave them that right as a part of all of the mortgage documentation, and not just help, you pay it all.
Q. How much could they charge for just for starting a legal procedure?
A. Most of the time they bill for the full expected legal cost of the complete foreclosure, expect $2,500 to $5,000 the day they start a file.
Q. That makes no sense, what if that's more than I owe in mortgage arrears?
A. It costs the same to foreclose no matter what you owe or how expensive your home might be.
Q. Can anyone waive or reduce these legal fees?
A.Yes, that's one of the things a professional mortgage negotiator would do in addition to modifying your mortgage or establishing a repayment plan.
Q. What happens if I send them a bank check for a few months payments so they know the check won't bounce?
A. They will send it back.
Q.How do I prevent them from calling my mortgage loan?
A. You solve your mortgage problems BEFORE they call your loan. Now you understand why the time frame between 60-120 days late means so much. As hard as stopping foreclosure might be, attempting to save your house after the bank calls the loan makes things much tougher.
Q. Alright, lets back up and imagine I've ignored the situation for a while and I owe two months mortgage payments but so far I did nothing, what should I do?
A. Like we discussed in the FAQ on first late mortgage payment issues you need to get a clear picture of what you financial future looks like, examine the various ways to stop foreclosure and get help to make sure you do not lose your home.
Q. What if I do have all of the money they want?
A. If you can pay everything demanded by the bank you can stop the foreclosure by getting them the right amount in the right timeframe in the way they want to be paid. I explain this and other self help methods in the article on self help mortgage solutions.
Q. Has my last chance been lost if I get behind more than 120 days late on my mortgage?
A. No, it just makes the job of saving your home from foreclosure much harder.
Q. What if my financial situation remains unresolved, like if I lost my job and still only get income from unemployment?
A. For those who can, I suggest making one full mortgage payment including the late fee. As discussed, once you go in arrears four months or more the bank may refuse your mortgage payments. Prior to that point the bank will accept a whole month's payment, even in you owe three months payments. Some people think even before the bank calls the note that they need to pay all or nothing to the bank. In some cases they even get this idea from the collectors at the lender's office who try to demand everything the homeowners owe.
Q. If I'm going to lose my house anyway isn't that throwing money away?
A. Only if you know for a fact that you can't keep the house, many people erroneously think they can't keep the house, when they still have many mortgage assistance options left.
Q. What good does making one payment do me?
A.It sets back the clock. This 120 day late mark that usually triggers the start of the bank starting a formal foreclosure count from the number of days you owe in arrears, not from the days since the first time you missed a mortgage payment. Therefore if you were 90 days behind and made one full payment the next month instead of the lender thinking you are 120 in arrears your mortgage they look at you as if you are 90 days late. The next month you could extend things once more. That would make it 150 days since your first missed payment but the bank still accounts for you as 90 days late.
Q. Who fits the profile to do this best?
A. People who have some income but don't know how their life will evolve over the next few months. At some point you need to catch up, but you can buy some time using this method to get another job, get back to work or whatever change might allow you to form a long term fix.
Q. What if I get to 150 or 180 days in mortgage arrears and the bank still failed to start foreclosure, does that mean I get to stay here without paying my mortgage forever?
A. Certainly not. At some point the bank will make you pay or foreclose. Use any extra time to help workout your problems, not to sit on your hands.
Nothing contained herein should be construed to constitute advice for your personal circumstances. This is intended as a peripheral exposure to the various options available, but by no means is this a comprehensive or exhaustive analysis of the bankruptcy laws or their alternatives. Whether or not you should file a Chapter 7, Chapter 13 or any bankruptcy, will vary depending on your personal circumstances and should only be undertaken after careful consideration, analysis and after consultation with an attorney experienced with such matters. These pages may contain information and rules peculiar to the Commonwealth of Massachusetts.
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The most recent update of this page occurred February 01, 2011.