If you are falling behind on your mortgage payment, your first act needs to be to contact your lender. Talk to them about your circumstances and find out what options are available to you. Oftentimes, lenders won't reveal what programs they have available, until they receive what they call a workout packet. Generally, a workout packet includes a breakdown of all your assets, income, debts and a letter explaining how you arrived at your situation in struggling to pay your mortgage.
After your lender receives your workout packet, your case is typically assigned to a default specialist of sorts who reviews your case, interacts with the loan's investor (s), if applicable, and determines which programs for which you are qualified. You may then be presented with one or more offers on how to mitigate the default and avoid foreclosure. There are many options that lenders offer today. Sometimes they will add what you have past due onto the end of the loan if you can prove you can pay the payments. This is called a payment deferment.
Other alternatives may be to do a reinstatement, repayment plan, loan modification or even a forbearance. What do all these terms mean? The following provides more explanation as to their applications:
* Reinstatement – This option is highly unlikely, unless you can borrow money from a friend or relative to catch up the entire past due, including accrued late charges, fees or penalties. This has been a viable alternative to some, though, since their financial hardship was temporary, like short-term disability or a family leave situation.
* Repayment Plan – Your lender determines that you will pay an additional amount over and above your regular monthly mortgage payment. The added amount is applied over a specified number of months in order to catch up the past due.
* Loan Modification – Your loan is modified with one or more new terms. With a loan modification, you may end up with a somewhat higher interest rate, lower interest, reduced payments, or some other modification that enables you to afford to pay your monthly mortgage. The government has a program that allows mortgage lenders to reduce your payments to 31 percent of your monthly income. For some, the Making Home Affordable (MHA) program has been the factor that has enabled them to save their homes from foreclosure. You may contact a MHA counselor at (888) 995-4673.
* Forbearance – Your provider will either reduce or suspend your mortgage payments for a specified period of time to enable you to get back on your feet. Once the timeframe is reached, you then begin making your regular monthly mortgage payments, along with either a lump sum or an added amount to each of your monthly mortgage payments over a specified period of months in order to catch up the past due.
If none of these alternatives work for you, you may need to consider selling your home or going into bankruptcy to save your home.