Missing a mortgage payment doesn’t mean lenders start the foreclosure process immediately. Federal law mandates when lenders can start. Typically, it’s not until you are more than 120 days late. The time from your late payment to the foreclosure proceedings is the pre-foreclosure period. You have options during this time.
The Grace Period
Your mortgage has many ‘periods’ or milestones lenders watch. The first is the grace period. During this time, you won’t accrue late charges. Most lenders give a 15-day grace period. Payments due on the 1st, for example, aren’t ‘late’ until the 16th. If you make a payment past the 16th, expect the lender to apply late charges.
At this point, up until 30 days past the due date, lenders don’t report the late payment to the credit bureaus. If you cross that 30-day mark, though, your credit report will show a 30-day late payment.
Paying Your Late Payment
If you bring your account current shortly after the 30-day mark, you are back on track. Doubling up on mortgage payments will be necessary, though, or you risk falling 30 days behind again. You have the same 15-day grace period and the extra 15 days before the lender reports it to the credit bureaus. But, you’ll accrue another late payment, which you must pay.
If you don’t bring your account current, you roll into a 60-day late payment.
60-Day Late Mortgage Payments
If you hit the 60-day mark, your lender will reach out often. Lenders don’t want possession of your home. They want you to pay your debt. They often try to work out a repayment plan. Don’t be afraid to talk to your lender at this point. In fact, not talking to them is the worst thing you can do.
Be honest. Let them know why you are late. Did you lose your job or fall ill? They may have a plan that will work with your situation. If you ignore them, though, they can only assume the worst. This makes them move forward with the pre-foreclosure plan. The further you get into it, the harder it is to redeem yourself.
90-Day Late Mortgage Payments
At 90-days late, lenders truly move toward the pre-foreclosure process. They will likely continue to reach out, typically in writing. They will warn you of the impending proceedings if you don’t contact them.
If you haven’t done so yet, call them. Get in touch and let them know the situation. Don’t be embarrassed. They don’t judge. Again, they don’t want your house. They want you to make your payments. You may be surprised to learn the helpful programs they have available. Some even include deferring your payments for a few months. You may also spread out the late payments over a series of months, in addition to your regular payment.
If you don’t talk to the lender at this point, though, you are headed straight to foreclosure.
Now, lenders definitely move forward with foreclosure proceedings. It doesn’t happen overnight. But, you’ll receive documentation that they’ve filed a Notice of Default. This is public record. Anyone in your area can find out about it.
The lender will also start the legal proceedings to repossess your home. It takes between six months to a year to complete. You may still redeem yourself, but it will be more expensive. If the lender incurs legal fees, you must pay them to redeem your loan. You’ll also need to catch up on the late fees and past due principal/interest payments.
It’s much harder to catch up at this point – try working out a plan before you get here.
The foreclosure process isn’t quick, but lenders are serious about taking back your home if you don’t pay your mortgage. If you have trouble, call your lender. Don’t worry about what they think. They have seen it all. They just want to get you back on track so they don’t have to deal with the expense and hassle of taking over your home, paying the lawyer and courts, and selling your home either on auction or with a realtor.