A delinquency timeline

If you fall behind on your mortgage, your loan will be described as delinquent. Lenders handle individual mortgage delinquencies differently, based on a number of factors. One of the important issues is the point at which you begin to work with them to find a solution. The sooner you make contact, the greater the potential for a resolution. The best time is when you recognize you have a problem but before you’ve missed a payment.

This timeline provides a general overview of the different stages of delinquency:

• Current. Your account is current if a full payment is received by your due date. While there is likely some grace period after this due date by which payment can be received before it’s considered late, it’s best to ensure your full payment is received no later than its due date. If your payment is not received on the due date, you may receive letters or phone calls from your lender, reminding you of or asking about your payment.
• Delinquent. If a full payment is not received by your due date, your account is considered delinquent. If the payment is not received within 30 days after it is due, you are likely to receive phone calls, letters, or both from your lender regarding your mortgage payment. You will also be charged a late fee.
• Seriously delinquent. After two missed payments, your loan may be considered seriously delinquent. At this stage, your lender may start a pre-foreclosure process that may include sending a Breach Letter or Notice of Default letter to you.
• Foreclosure. Generally, after your payment is 90 days past due (although this time frame varies by lender and the state where you live), your lender will probably begin foreclosure efforts, which may eventually lead to the loss of your home.

Remember that this summary provides a general overview of the various points in mortgage delinquency. It is important to contact your lender not only as soon as you find yourself having difficulty making your mortgage payment, but also throughout the process, as options for staying in your home or avoiding foreclosure may still be available.

The consequences of foreclosure

Foreclosure impacts many people. You and your immediate family lose your home and whatever money you invested in the property. You may have to face leaving extended family, friends and schools behind as you seek a new place to live. Your credit score and credit report will be seriously damaged, which may make it difficult to borrow again in the near future and may also affect what you pay for insurance and other expenses.

Your community loses because a family who may have worked there, purchased goods and services from local businesses, and contributed to its vitality is gone. The community may also lose revenue from property taxes if home values decline or if many houses remain empty.

Finally, and despite what some believe, lenders also lose every time a home goes into foreclosure. In fact, a foreclosure often ends up costing lenders a lot of money. Your lender would much rather have you continue to pay off your mortgage throughout the term of your loan than end up owning your home. Unfortunately, it is sometimes unpreventable.