What Happens When You Fall Behind On Your Mortgage?
Apparently, someone in Miami just dropped $47 million on a house so that must mean things are getting better, right?
Thankfully, we’re starting to see some hints of improvement in the residential mortgage sector.
But what does the bank do if you’re barely hanging on, and are still a little behind – or maybe still a lot behind – on your mortgage?
First, it depends on your definition of behind. It may not be the same as the bank’s definition (not shocking). Let’s examine:
1 – 15 Days Late
Most companies allow a 15-day grace period before tacking on any additional fees. I know that, being self employed, my mortgage company calls me on the second of the month if I didn’t pay on the first, but there’s nothing to worry about if you’re “behind” less than 15 days. No big deal. That’s why they call it a “grace” period.
15 – 30 Days Late
If you’re in that 15 to 30 day time frame, prepare for a ton of telephone calls from your mortgage service provider (probably between two and four a day). You’ll also begin receiving letters reminding you that if you forgot to pay your bill, now would be the perfect time to make that payment. Back when my income was very unsteady, a sneaky trick my mortgage company would pull was to send out another bill insinuating that I was two months behind and that if I disagreed with them I should call ASAP. Sneaky snake oil salesmen they were. During this fifteen to thirty day period, if you can’t pay, don’t worry about the phone calls. You’ll have to pay a small late fee of some kind, but there still won’t be any damage to your credit report.
30 - 59 Days Late
It’s important to note here: If you’re running up against that 30 day late period, it’s best to drop everything and pay your mortgage. Even if you’re habitually late 29 days; it’s better than being 30 days late from a credit reporting standpoint.
Now the letters and phone calls increase dramatically, until you’re 60 days late. Your credit report will note your current late status. Your credit score will fall.
60 – 90 Days Late
Here the phone calls and letters will cease. Does the mortgage company give up? Ah…that would be nice, but alas, no. They change tactics. Once you’re over 60 days late, they’re going to send someone out to your house, just to make sure it and you are still there. You can see these people coming a mile away. They circle your block two or three times, usually they don’t look like they belong in your neighborhood, then they run up to your front door, peer in a window or two and leave a note on your door saying “Sorry we missed you. Please call us at once.”
It’s at this point you should start preparing for your next steps. If you’re 60 or 90 days past due, it’s probably a lingering problem, but hope is not all lost.
The biggest thing you can do when you’re behind is to communicate with your lender. Home lenders have instituted a number of programs to help you work through your late status. The second biggest thing to remember is that the people you talk to don’t know you and you don’t know them. And, they don’t care about your problems. It makes no difference to them whether you stay in your house. They’re a thousand miles away in a cubicle. Stay calm while talking to your lender.
When you’re behind more than 30 days, you need to start talking – but don’t wait until it’s too late. Call your mortgage company, explain your personal circumstances, and begin laying the ground work to solve the problem. Can you pay the late payment over a couple of months? How about rolling that payment to the back of the mortgage? Can they waive a fee or two? Sometimes they will, sometimes not. But you’ll never know if you don’t ask.
Next week I’ll talk about the different options you have when you’re really behind on your mortgage and what they all mean. Stay tuned!
Photo: Hanging On: Jess2284
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