Being behind on a mortgage payment is a frightening situation.
For most people, a mortgage is the largest financial transaction they will make and therefore be the largest payment in their expenses. That makes the task of catching things up a daunting one.
Whether you’ve only missed one payment or are several payments behind, there are options to help you prevent foreclosure.
Understanding What Caused You to Fall Behind
The first step in the process is understanding and coming to terms with the reason for default.
Unfortunately, homeowners with delinquent mortgages often choose to ignore the situation they are in or believe they can catch up on their own while making the minimum amount of payment allowed. Neither of these scenarios bring much success for delinquent borrowers.
Determining what led to one or more mortgage payments being missed is vital to getting back on track. Understanding why you fell behind will help determine which assistance option is best suited to your situation.
Most hardship scenarios fall into either a short-term or a long-term hardship bucket.
Examples of a short-term hardship are unexpected increases in expenses (such as car repair or home maintenance), loss of usually consistent overtime pay, short-term disability or unemployment.
Long-term hardships lead to a permanent altering of income or expenses such as the death of a spouse or person who contributed to household finances, permanent loss of employment due to illness or disability, or divorce.
Own Your Resolution
The most important step in getting back on track and avoiding foreclosure is to be engaged in finding an outcome.
Some homeowners may feel embarrassed or ashamed of being delinquent on their payments. Others avoid speaking with lenders out of fear.
There is a misconception that mortgage companies don’t want to help. They just want to take a client’s home through foreclosure. This is the farthest thing from the truth. Nobody comes out ahead when a home goes into foreclosure.
There are multiple options to save a home from foreclosure, but a homeowner has to be engaged in the process to benefit. Every lender has a team to work with clients over the phone or in person to help avoid foreclosure.
To make things easier for our clients, Quicken Loans® and Rocket Mortgage® have created a way for clients to take charge and own their resolution. Rocket Solutions, a self-service process that allows delinquent homeowners to get back on track without ever having to speak to a human.
If you log in to your Rocket account, you’ll find this self-service process under the Falling Behind section of the Help tab. Clients just need to provide information about their reason for delinquency and their income and expenses to find an assistance option that can help their situation.
Consequences of Mortgage Delinquency
Beyond the stress of knowing that you are behind on your mortgage, there are other factors to consider that could motivate someone, like credit implications.
We live in a very credit-driven society. Since a mortgage is typically someone’s largest obligation, it has a very heavy weighting on credit scoring. Having one 30-day late payment reported on your mortgage can cause a 740 credit score to drop to 640 or lower. It could take up to three years to recover from a drop like that.
You may be thinking that you don’t need to worry about your credit because you own a home and don’t plan on buying a new one anytime soon. Even if you don’t plan on making a home purchase soon, there are other impacts to consider when it comes to a reduced credit score.
Roughly 30% of new cars are leased which means that in 3 years or less, a new car loan or lease will need to be obtained. Since one 30-day late payment can take years to recover from, that new car transaction will take place with an impacted credit score. A lower credit score leads to a higher car payment and can also impact other expenses such as credit cards and premiums on insurance.
The negative impact of missing one mortgage payment, let alone multiple, goes beyond the confines of having to catch things up. The amount of money required to be spent on other expenses can be greatly increased, which can lead to the potential of even greater financial strain.
Options Available to Help You Keep Your Home
Contrary to the misconception that mortgage companies aren’t interested in helping homeowners, there are four different options typically available to help you get your mortgage back on track and stay in your home.
The first and quickest is reinstatement. This is a one-time lump sum payment of the past due amount.
With a one-time transaction, the loan does not go any further into delinquency and negative credit impact ceases as long as the mortgage is continued to be paid on time.
This money could come from a large tax refund, bonus at work, or a helping hand from a friend or family member.
In the event that you had a short-term hardship that is behind you and your finances have returned to normal, a repayment plan may be the most suitable option for you.
A repayment plan takes the amount of the mortgage that is past due and splits that up over a few months in addition to your normal mortgage payment. You pay extra each month until the past due amount is satisfied.
This is a great option for those who have a little extra in the budget as it does not change the existing terms of your mortgage.
If your hardship falls into the long-term bucket causing your financial situation to be permanently altered, and you cannot bring the loan current through a repayment plan, a loan modification may be the best option.
A source of income is required but a loan modification does not require you to make up the past due amount out of pocket. The delinquency is settled through a restructuring of the loan which can extend the term of the loan and may alter the interest rate in order to make the mortgage more affordable.
The remaining option, forbearance, is a temporary option that will not help you settle the delinquency on the mortgage, but it can help assist in the event you have a short-term hardship that is not yet resolved, such as unemployment or short-term disability.
A forbearance will temporarily reduce your mortgage obligation while also providing protection against foreclosure proceedings as long as the terms of the forbearance are being met. Once the hardship is resolved and the forbearance is complete, the past due amount will have to be resolved through either a reinstatement, repayment plan, or loan modification.
If you’re behind on your mortgage, find out which option is the best fit for you by contacting your mortgage lender. If you have a mortgage with Quicken Loans and you have fallen behind, your resolution is right at your own fingertips. Log in to your Rocket Mortgage account and navigate to the “Falling Behind” section on the Help tab to find the best resolution for you.
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