Before You Are Late on Payments
You may be current on your payments, but see some red flags — your income is going to be reduced; you see larger expenses in the future; or an option/adjustable rate mortgage is about to adjust to a high mortgage payment.
At this point your options are:
- Continue to pay the loan
Find a way to decrease your expenses or increase your income.
- Refinance the loan to a lower rate
If the property is worth less than the mortgage, there is a federal mortgage relief program called the Home Affordable Refinance Program (HARP). This option allows you to:
- Refinance the 1st (primary) loan
- Your Loan-to-Value (LTV) ratio on the first loan can be up to 125% of the value of the property
- Loan Modification
If You Are Late on Your Payments
The following timeline is general and can vary depending on what state you live in.
- Up to 30 days late
You can expect letters with late fees requiring you to make your payment to become current.
- 30 – 60 days late
You can expect to receive a Mortgage Acceleration Letter or a Notice of Intent to Foreclose. These letters will demand that the outstanding loan payments are paid in full (plus penalties) otherwise the house will be foreclosed on.
- 2 – 6 months late
If contact with the lender and arrangements to pay have not been made yet, then the lender will now file a Notice of Default — an official foreclosure document that is publicly recorded.
- Continue to be late
If the default isn’t corrected during this period then a Notice of Sale is made which gives a date on which the house will be auctioned at a Trustee Sale.
Alternatives to Foreclosure
At any time before you receive a Notice of Sale, there are options open to you. However, the earlier on in the foreclosure process you are, the more options are available and the more opportunity there is to make a deal with the lender in order to avoid foreclosure.
To keep the house your options are:
- Full Reinstatement
- Repayment Plan
- Loan Modification
- What if I’ve been denied a loan mod?
If Foreclosure is Inevitable
If you will never be able to make the payments and foreclosure is inevitable, your foreclosure alternatives are:
These options allow you some time to make relocation and new housing decisions. If you qualify, the government Home Affordable Foreclosure Alternatives (HAFA) can provide you additional money, time and protection to relocate and avoid a foreclosure.