Falling behind on your mortgage payments puts you in a dangerous situation. Miss just one payment – which usually translates to paying more than 10 to 15 days late, depending on your individual grace period – and your lender will probably assess a late fee of 5 to 10 percent on your next statement.
If you’re behind on mortgage payments, don’t make your next monthly payment, and pay the overdue amount in full, your lender will consider you in default and will probably contact you to work out a plan to get current. Miss a third payment and your lender will send you a demand letter, which gives you 30 days to pay the total amount due.
If you can’t provide that money within 90 days, or if you miss the fourth payment, your lender will probably start the foreclosure process. So what can you do if you’re behind on mortgage payments?
3 Strategies if You’re Behind on Mortgage Payments and Need Help
When you start to fall behind on mortgage payments, it can start to feel like the end of the road. All you can see in front of you is foreclosure proceedings, and you start to wonder if your best bet is a sign on your lawn saying, “Behind on mortgage payments. Need help.”
As a struggling homeowner, you have better options.
A lot of people fall behind on housing payments; you’re not alone. Fortunately, there are people you can talk to who can help you catch up. Here are just a few options.
1. Research Government Assistance Programs
To help people who are behind on their monthly payments and need help, federal and state governments offer a number of mortgage assistance programs. Although the federal government has canceled many, including the Making Home Affordable initiative, there are still a few that can help those who qualify.
HARP, also known as the Home Affordable Refinance Program, is designed for people whose homes are worth more than they currently owe. It is available to borrowers whose loans are backed or owned by Freddie Mac or Fannie Mae and is restricted to those who are current on their payments. If you are behind on mortgage payments you may not qualify. But if you have not been more than 30 days late in payment over the past six months and have made no more than a single late payment in the past year, you may be eligible.
The federal government may not have any options left for borrowers who are already behind on mortgage payments, but thanks to the Hardest Hit Fund®, residents of 18 states and the District of Columbia may have options through their state governments.
For example, in North Carolina, the NC Foreclosure Prevention Fund can offer financial assistance to homeowners who are going through a temporary financial hardship. Through this program, government funds can cover mortgage payments while the homeowner is working to secure new income. The fund also offers principal reduction services to those who have secured income but are still struggling to pay.
To see a list of states with similar programs and to assess your eligibility, visit the MHA’s HHF information page.
2. Call Your Lender to Discuss Options
They don’t tend to put it front and center on their marketing materials, but lenders are open to working with borrowers to behind on mortgage payments to help them avoid foreclosure. After all, if your house goes into foreclosure, you don’t make any more payments. To keep this from happening, your mortgage lender may work with you in one of the following ways.
Developing a repayment plan.
This is like a payment plan that you might work out with a credit card company if you’re behind on mortgage payments. Your lender will help you figure out how much you can afford to pay each month and use that information to create a strategy that lets you work toward getting current on your mortgage payment.
Drawing up a mortgage modification strategy.
Although the federal government no longer handles mortgage modifications through the MHA, many private lenders are willing to change the interest rate, term, or balance on your loan in order to make it affordable. These modifications are similar to HAMP but are privately arranged.
Offering a special mortgage forbearance.
If your period of financial hardship is temporary, your lender may be willing to reduce or suspend your payments until you get back on your feet. Your lender will consider your situation and determine what is feasible to create a forbearance or deferment plan.
Arranging for refinancing.
Many people require mortgage assistance because they have signed up for adjustable rate mortgages (ARM’s) or hybrid ARM’s, which means that a borrower can start off with a low rate but face higher interest later on. If you’re in this situation, talk to your lender to see if you might benefit from switching to an adjustable-rate mortgage.
A Note on Communicating With Your Lender
If you’re behind on mortgage payments and plan to talk to your mortgage lender about any of these options, be sure to keep thorough records of each conversation. Create a file that includes:
- All letters that your mortgage company sends to you
- Copies of all documents that you send to your lender
- A written record of all phone calls, emails, and letters
Don’t wait for your lender to reach out to you. As soon as you think you might fall behind or have started to fall behind, call and see what options might be available.
3. Call a HUD Housing Counselor
The US Department of Housing and Urban Development, or HUD, sponsors local housing counseling agencies nationwide. A housing counselor offers low-cost advice on a variety of issues related to the renting or ownership of residential property, and their foreclosure avoidance services are always free. The HUD’s list of these agencies by state is available online or by phone.
As a seller, you would receive all of the equity that you have built up on your home, which means that you would be able to pay off debts that you owe to your current lender. There’s no packing, no moving, no foreclosure proceedings that result in leaving your home against your will. You simply keep paying rent until you are ready to re-purchase your home or relocate.
If you fall behind on mortgage payments, it can cause a lot of stress and fear. However, there are options available to you that you can utilize before letting panic mode set in. Work with a financial consultant to figure out which option is best to help you get back on your financial footing.