If you do not pay your mortgage on date or if you pay less than your monthly payment, you default on your loan. The consequences of non-payment can be expensive.
The Federal Trade Commission (FTC), the national consumer protection agency, says it is important to understand the costs of non-payment. The agency also points out that if you are having trouble paying your mortgage, contact your loan administrator as soon as possible to discuss your options. The longer it takes to call, the fewer options you will have.
What happens if I fail to pay my mortgage?
Failure to pay your mortgage can add the cost of several charges to the amount you already owe. It can also hurt your credit score. And in the end, it can cause you to lose your home.
Charges for late payment. If you are late in paying, you may be subject to an additional late payment fee. Late fees can add hundreds of dollars to your mortgage account.
Charges related to non-payment. The administrator of your mortgage is the company that manages the account of your mortgage loan. If you default and default, your mortgage servicer may charge you for “services related to non-payment” that, over time, can add hundreds or even thousands of dollars to your loan.
Services related to non-payment can include:
- Property inspection to make sure that you are living in the house and to control that you are maintaining it.
- Preservation of property , which includes the costs of services such as mowing, gardening and repair, or the cost of covering broken windows or doors with boards.
- Foreclosure costs , which may include attorneys’ fees, charges for finding title deeds, and costs of postal mailings and publication of foreclosure notices.
Damage to your credit score. Mortgage managers provide information about your payment history to the credit reporting companies, which includes reporting if you were behind with a fee or omitting any payment. Even a single payment delay decreases your credit score, which in turn affects your ability to obtain a loan in the future – and the interest rate that will apply.
Foreclosure If you incurred default, your mortgage servicer can initiate the foreclosure process. This will not only add expenses to the costs that you will have to pay to get up to date with your loan account, but also, the foreclosure procedure is a matter of public record. As a result, it will be harder for you to obtain credit in the future to buy another home. If you are unable to catch up on your loan or if you can not find some other solution, your house could be sold at a foreclosure auction. In several states, you will also be required to pay the ” deficiency judgment” , whose amount is made up of the difference between what you owe and the price you get for the house at the auction. of sale of the foreclosure process.
What should I do?
Be very attentive to your mortgage loan account. Check your account regularly to check that your payments are credited on date and to make sure you are not charged any unexpected or unusual cost or charge. If you do not receive monthly account summaries, ask your administrator if you can access your online loan account. Be active and question everything you do not understand and keep records of all communications with your mortgage servicer. Among the things you have to monitor are the following:
- Accreditation of payments. Keep a record of the amount and date of your payments. If you made a full payment, the administrator must credit your loan account the same day you receive it. If you make a partial payment, the administrator of your loan is not obliged to credit your account and can return the payment and place your account in “suspended” or “pending” status: which means that the payment is in limbo until you provide the funds to complete the total amount of the fee.
- Additional charges for late payment incorrectly applied. Most mortgage loan agreements include a “grace period” – which is the time you have to pay without incurring the application of a late payment fee. If you pay within the grace period, you should not be charged any late fees. The payment date is the day in which your administrator receives the payment and not the day you send it.
- Multiplication of charges for late payment . Only a late payment fee should apply if you do not pay the full amount of your mortgage monthly. Some mortgage servicers have applied late fees for full monthly installments paid on the date because the borrower did not include the amount of a late payment fee that had been left unpaid. This practice is known in English as late charge “pyramiding” , something like a mountain of charges for late payment, and is a practice contrary to the law.
- Charges for services related to non-payment. Check your account to check if you have been charged for services related to non-payment. Be sure you understand what they are for and why you were charged those charges. If your account summary shows mysterious charges registered as “other charges” or “corporate advances”, contact your loan administrator to explain them to you.
- Escrow account. If you have a escrow account, better known as an escrow account, which is linked to your loan and whose funds are used to pay real estate taxes and the owner’s insurance premium, review the annual summary of your escrow account. Check that the amount of the taxes and the insurance premium listed in the summary is correct and that the taxes and insurance have been paid by date. If you have an escrow account, the amount of your monthly payments will increase if the value of the taxes or the insurance premium increases. In case the escrow account has few funds, adjust the amount of your monthly payments to cover those payments.
- Mortgage management services during the bankruptcy repayment plan. To stop a foreclosure, some borrowers choose to declare bankruptcy under Chapter 13. When a person files for bankruptcy under the provisions of Chapter 13, the court generally approves a repayment plan that allows you to pay off your debts within a period of time. between three and five years. The bankruptcy payment plan may include the amount of the unpaid and unpaid installments of your mortgage, but it does not affect your obligation to pay the current mortgage payments. You must continue to pay the monthly installments in full and on the date otherwise you may incur non-payment. In that case, you may be charged late fees and charges related to non-payment, and your mortgage servicer may ask the court for an authorization to run your home.
It is important that you continue to monitor your mortgage account, even during bankruptcy. Make sure that you are credited with the amount and date of payments correctly. Check that there are no charges or incorrect costs for late payment and closely monitor your escrow account.
Where can I go for help?
If you are struggling to make your payments or if you have already fallen behind or default, contact your mortgage servicer immediately. There are many people who are embarrassed to talk to their mortgage servicers about their payment problems, or who hope their financial situation improves in order to catch up with their payments. It is important to keep communication channels open to solve problems that may arise with your loan. Options to help you get up to date with your home loan and save your home from foreclosure include loan modifications, repayment plans, or a temporary reduction or suspension of payments. If you are not eligible to access any of these options, your mortgage servicer may be able to help you find a solution that is better than a foreclosure, such as a short sale , or a voluntary transfer of the property through a “deed in lieu of foreclosure”.
In addition, by keeping in touch with your mortgage servicer, you can save money, and thus, you can get up to speed with your mortgage loan more easily. For example, although mortgage managers have different policies regarding the time required to require services related to non-payment, some may not require you to inspect the property or require preservation work if you inform them of all the months that continues living in the house and that is in charge of its maintenance. And they are also likely to delay the sale of the property at auction or foreclosure if they are working with you to find a better solution.