How to Handle a Delinquent Mortgage Loan
When a homeowner has to endure the embarrassment of a foreclosure, it can be quite devastating to their credit. It is also difficult to get future credit. For that reason, you want to avoid going into foreclosure, if at all possible. It is best to have good standing with your mortgage lender, even if you are falling behind on your monthly payments. There are ways that you can handle a delinquent mortgage loan.
First Option - Renegotiation
You can try to contact the lender for renegotiation of the mortgage terms. It may take some convincing, but if a mortgage lender finds that you are sincerely trying to work things out, the lender may comply. Most borrowers don’t take this route for fear it will be shot down. Be fair in your renegotiations. Don’t expect your lender to accept an unfair gesture. Your lender won’t consider taking the property back from you, if you make an attempt to keep your loan current. In fact, the sooner you can contact the lender, the better the negotiation process.
Second Option – Reinstate the Loan
Before a foreclosure sale can take place, the borrower can ask for a loan reinstatement. However, the borrower must have the funds needed to catch up on back payments in addition to any filing or legal fees. Once the reinstatement amount is paid off, the foreclosure will be called off altogether. It will also allow the borrower to stay in the home. There are many borrowers in delinquency, but cannot take the loan reinstatement option since they are already carrying more debt than they can afford. It is best to have a consultation with a real estate attorney to see your options.
Third Option – Forbearance
Forbearance is one of the most overlooked options that borrowers fail to consider. With forbearance, the borrower will be able to delay the loan payments for a certain period of time. The lender could partially waive the payments, creating a moratorium phase where the borrower has time to find a solution to the debt problem. In these cases, the borrower may be in between jobs and seeking a new one or have decided to sell the property or looking for another satisfactory solution.
Fourth Option - Loan Restructure
A loan restructure will depend on the mortgage lender. Some lenders will consider adding the late payments to the backend scheduled payments. The lender also could give the borrower more time to bring the delinquent account current. In other cases, the lender will consider a repayment plan. It is best to contact the lender for the best available option.
Fifth Option – Redeeming the Loan
This option allows the borrower or homeowner to pay the loan completely off. To get this done, the borrower would do a refinance of the property. The borrower, however, has to get a cosigner, possibly offering equity in exchange for the help.
Bankruptcy is also another option, but it is best to make this the last option since bankruptcy can also mess up your credit and linger on your credit report for years. The ideal option is to work with the lender to find a viable solution.