If you have too many missed mortgage payments, your mortgage company will no longer accept payments from you. After too many missed mortgage payments (typically three), your lender will instead insist upon payment in full of the entire amount past due. The amount of missed mortgage payments, plus penalties and interest, is called the “arrearage.” If your mortgage lender or servicer actually accepts a payment, they will apply it to the oldest due payment. That usually means that you are still in default; the arrearage is still due in full.
One Missed Mortgage Payment:
Call Your Lender
Be proactive and contact your lender, especially if you know beforehand that you may miss a mortgage payment. If you have never defaulted on your loan, your lender will usually have an option or two for you. Be friendly on the phone. Ask what options are available and choose what option best fits your situation.
If you have missed payments in the past, your options may be limited. Lenders retain the entire record of your loan. If your loan was bought by another lender, the new mortgagor knows whether or not you missed payments with your former lender. You have more options with one missed mortgage payment than with two missed mortgage payments. And you have more options if you have never before defaulted.
Two to Five Missed Mortgage Payments:
Get the Money Together
Once you are three months (and sometimes even just two) behind on your mortgage, your lender will stop accepting monthly payments. Lenders insist upon curing the arrearage in full. For example, if you have a $1,500 payment and have missed five months, your lender will only accept a payment of $7,500 to reinstate your loan.
If you can, get the money together and pay off the arrearage in full. But only do this if you can continue to make the ongoing monthly mortgage payment. If the hardship that led to the default continues to exist, you may have better options. Don’t cure the arrearage if you will simply fall into default the next month.
The five-month timeline is a general rule and not specific to all situations. If you have either a high mortgage payment or lots of equity in your home, your lender will move more quickly.
Six or More Missed Mortgage Payments:
Contact an Attorney
You are headed for foreclosure if you miss six or more mortgage payments. For most home loans, lenders commence foreclosure proceedings at this point. The sooner you contact an attorney, the more options you will have.
Options include mediation, modification, sale or short sale, and bankruptcy. The wisest course is not to wait for foreclosure. Instead, call a foreclosure defense attorney and chart a plan of action. The bank’s foreclosure costs and expenses can unnecessarily cost you thousands of dollars unless you take steps to resolve the problem.