Don’t Stick Your Head in the Sand

If you are unable to make your mortgage payment, it is critical that you call your lender now in order to avoid foreclosure. Homeowners who seek help early are much more likely to work out a solution, no matter how dire their situation. Ignoring the bills and the calls from your lender will only make matters worse and increase the likelihood that you will lose your home. Remember that mortgage companies are much more interested in the money they make off your interest than the money they'll lose foreclosing on your home. This means that your lender is also interested in helping you avoid foreclosure and may be able to provide the help that you need.

What Kind of Help Can A Lender Offer?

Lenders have several options for helping homeowners who can't make their mortgage payments because of a hardship and want to avoid foreclosure:

Forbearance

This is a temporary agreement that delays payments for a short period of time. Mortgage lenders will only allow forbearance if you can prove that your hardship is temporary and that you will have the means to begin making payments again in the future. Some common examples where a lender may agree to forbearance would be an expected tax refund or a bonus where you know of future earnings that can bring their mortgage up-to-date.

Reinstatement

If you're behind on your mortgage payments, a reinstatement can take place when you make a lump sum payment, which brings your account back up to date. Lenders often combine reinstatement with forbearance to allow homeowners who are slightly behind on payments to catch up.

Repayment Plan

A mortgage company may give you a fixed amount of time to catch up by combining a portion of your past due amounts with each of your regular payments. This allows a homeowner to catch up on payments gradually without having to make a lump sum as in a reinstatement.

Loan Modification

The terms of your loan can be adjusted. Changing the amortization table or lowering your interest rate can make a big difference, reducing your monthly payment amount to something you can afford. An example of this would be a 2% drop in your interest rate and extending your mortgage over 40 years instead of 30 years.