Drowning in mortgage debt?
Lenders can help you stay afloat even after you get behind in your payments
By Wayne Faulkner
Business Editor
wayne.faulkner@starnewsonline.com
The road to foreclosure can start with a late mortgage payment and end at the courthouse steps, where your house will be auctioned to the highest bidder.
But you don't have to go down that road, even if you have fallen seriously behind on your payments.
Your mortgage company can help in several ways, but the key to keeping your home and your credit rating is to act early, say lenders, counselors and attorneys.
The people to whom you owe thousands of dollars are in the lending business, not the property business. Especially in a housing market where prices are stagnant and homes are hard to sell, why would they want to be saddled with owning and keeping up your home?
So, if you think you're going to miss your next house payment, call your lender or the company that services your mortgage - where you send your payments - before you're late, said Dickson Bridger, senior vice president/mortgage lending at Wilmington-based Cooperative Bank.
See if they can work something out before you're in the midst of a financial crisis.
If your payment is due on the first of the month, you technically are delinquent on your loan the next day, though late-payment fees usually don't kick in until the 15th, Bridger said.
"We don't send notification out (of delinquency) until after the 30th," Bridger said. "After 30 days we report (the delinquency) to the credit authority. We don't start any foreclosure procedures until after 60 days."
At that time, Bridger said, the homeowner "gets a letter that says they have five days to bring the loan current or make some kind of arrangements" to make their payments.
And there are several arrangements you can make, according to the giant mortgage company Freddie Mac.
Forbearance is an agreement to temporarily let you pay less than the full amount of your mortgage payment, or pay nothing at all, during the forbearance period. Mortgage companies may consider forbearance when you can show that funds from a bonus, tax refund or other source will let you bring the mortgage current at a specific time in the future.
A reinstatement occurs when you pay your mortgage company the total amount you are behind, in a lump sum, by a specific date. This is often combined with forbearance.
A repayment plan is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
A loan modification is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable. Common loan modifications include adding missed payments to the existing loan balance, making an adjustable-rate mortgage into a fixed-rate mortgage. and extending the number of years you have to repay.
Lenders have different policies, but the trend is to work out a solution with the borrower, Bridger said.
If the customer has a legitimate reason for not making their payments, we "can go in and defer their payment," Bridger said. If, for instance, the bank agrees to defer your next two payments, that amount will be added to the principal of your loan, he said.
If the customer says they need to run a month behind in their payments, "we can work with that to keep it from affecting their credit situation," Bridger added.
But you must make these arrangements with Cooperative before the payment is 30 days delinquent, he emphasized.
The company you need to contact to help you out of your problem may not be the lender, but rather a company that services your mortgage. If you anticipate payment problems or if you have the problems already, contact the company to whom you make your payments. If you are unsure of what company to contact, check with the folks who originally made your loan, whether a bank, a mortgage bank or a mortgage broker, and they may be able to put you in touch with the right people, Bridger said.
Cooperative Bank will let you save your home right down to the wire. "They can pay up to the day of foreclosure," Bridger said. But they'll have to pay not only the money they owe in house payments, but for the bank's considerable expense for the foreclosure process.
But don't let yourself get that far.
"Don't wait until you've missed your payments to contact the bank," Bridger said. "It's very important."
Wayne Faulkner: 343-2329
wayne.faulkner@starnewsonline.com