Struggling with your mortgage payments? Learn more about home retention
Trying to keep up with your mortgage payments in an economy with rising costs can be stressful. Sometimes financial hardships get in the way of affording your next payment, like a sudden medical emergency, a divorce or a job loss. Even though there are things more important than your mortgage, you will want to do everything in your power to be in good standing with your servicer. If you’re behind on your mortgage payments by 60 days or more, your lender or servicer may have to issue you a notice of foreclosure.
If you’re feeling overwhelmed right now, we want to let you know that everything will be okay. Many homeowners have faced this same struggle you are facing now and were able to get back on track. There are plenty of options available to help homeowners facing delinquency on their mortgage payments. There is no shame in needing to ask for help. We all need help sometimes.
What to do first to retain your home
If you’re about to fall behind or are currently falling behind on your mortgage payments, you should do the following:
- Reach out to your servicer as soon as possible.
- If you don’t know who your servicer is (mortgages often change servicers in the life of a loan), check your most recent monthly loan statement. This statement was either printed and mailed to you or sent to you over email and will have all relevant contact information.
- If you are still having trouble finding your servicer, contact a HUD-approved housing counselor.
- Have an honest discussion with them.
- This is a difficult, but crucial step. You need to tell your servicer what’s going on. They will need to know why you’re unable to make payments to know what options might be best for you.
- Be prepared for any questions they might ask.
- Your servicer will need to know why you’re unable to make your payments and whether this is short-term or not. They may also ask questions about your current income, expenses and assets, like cash you might have in the bank. You will want to prove to your servicer that you’re still able to resume payments once you get through this hardship, so you can start the home retention process.
What is home retention?
Home retention is the process you take to prevent foreclosing your mortgage and stay in your home. This process is unique for every borrower, as your servicer will take a comprehensive look at your current budget and help you identify your options.
The most common retention options that might be available to you include:
- Getting a forbearance
- Getting a deferral
- Getting on a repayment plan
- Modifying your existing loan
- Refinancing your loan
- Reinstatement
How to get a forbearance
The most common option given for home retention is a forbearance. When your mortgage goes into forbearance, the payments are paused or reduced for a period of time. This gives you an opportunity to get your finances back in order. However, once this period is over, you will have to pay back all missed payments in a lump sum plus accrued interest. If you’re not able to pay back all missed payments another retention option will follow. Pay what you can during the forbearance period to make getting out of delinquency easier.
How to get a deferral
Also referred to as a “partial claim”, a deferral is often mistaken for a forbearance but is actually an option that may be available to you after forbearance. In this option, the servicer will move all of or part of your past-due amounts to the end of your loan term. This will put your mortgage back in good standing. However, once you’ve paid off your loan, sell your home or refinance, you’ll also owe the deferred amount. The deferred amount won’t accrue interest unlike forbearance.
How to get on a repayment plan
If you’re facing a short-term hardship and don’t qualify for refinancing, your servicer will suggest getting on a repayment plan. During a repayment plan, your past-due amount will be spread out over time (typically less than 12 months) and added onto your current monthly payment.
Modifying your existing loan
For those facing long-term hardships, another retention option is a loan modification. In a loan modification, you’re able to change one or more of the original terms of your mortgage, like your payment amount, length of your loan, your interest rate and more. However, these terms may be modified to include your past-due balance.
Refinancing your loan
Much like modifying your loan, there’s also the option to refinance your mortgage with a new term, interest rate and payment amount. This could be a great option for those with an adjustable-rate mortgage, a high interest rate or considerable equity built up in your home. Refinancing could mean a lower and more affordable monthly payment. However, if you are behind on your current mortgage, this option may no longer be available.
Can I get my home loan reinstated?
This one might not be possible for many, but a reinstatement is also an option. This is when you pay the full amount that’s due in a single payment. This will stop a foreclosure as long as it covers the payments in default as well as fees and expenses after defaulting. This is the fastest way to get your mortgage back in good standing with your servicer.
Do I need to watch out for scammers?
You might receive phone calls or emails or see ads on social media claiming to help rescue you from foreclosure or eviction. Scammers will often do this to steal your personal information or money. One of the techniques commonly used is “spoofing”, where they disguise their email, letter or website to convince you that they are legitimate. Protect yourself from scammers and don’t trust anyone without properly researching them first. We recommend looking up any companies through the Better Business Bureau who specializes in helping protect consumers from scammers.
What do I need to know to retain my home?
Financial hardships happen, but we want you to remember that you are not alone and there is help available. Two things you can do right now to get in good standing on your mortgage:
- Talk to your servicer as soon as you can and be honest about your situation.
- Try to get as much information as you can about your home retention options and the terms of your agreement.
With this knowledge, confidence and some patience, you’ll be back on track in no time.
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