How to Collect on Mortgage Arrears
Mounting mortgage arrears must be dealt with firmly. Permitting a borrower to slack off on making mortgage payments leaves a lender in a precarious position. There is an effective, often-used procedure available for a lender to collect on mortgage arrears. The key is to begin the process of enforcing a borrower's mortgage obligation sooner rather than later. The process involves making firm demand for proper payment under the loan agreement leading to initiating a foreclosure.
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Instructions
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Draft a demand letter to the borrower. Within the letter, set forth the specific amount of money that is in arrears, including principle payments, interests, late fees, penalties and other charges. In many jurisdictions, you must put forth a demand letter and attempt an informal resolution of mortgage arrears before you file a lawsuit, including a foreclosure case.
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Set out in the demand letter a date by which the entire amount due and owing must be paid, or you will initiate legal action, including filing a foreclosure.
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Deliver the demand to the borrower, either in person or via U.S. mail, return receipt requested.
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Obtain from the court clerk a standard-form foreclosure petition. The next stage in the process of collecting on mortgage arrears is taking legal action in the form of a foreclosure.
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Complete the standard form petition for foreclosure obtained from the clerk of court's office.
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File the petition for foreclosure with the clerk of court.
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Request the clerk to direct the sheriff to serve the petition for foreclosure on the borrower.
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Negotiate further with the borrower about a potential settlement that resolves the debt in arrears. In many cases, a borrower becomes more inclined to deal with mortgage arrears when facing defending a foreclosure case.
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Obtain a final order of foreclosure if you are unable to otherwise settle the issue of mortgage arrears with the borrower.
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Tips & Warnings
Considering the complexities of collecting on mortgage arrears and pursuing foreclosure, your interests are best served by retaining an experienced attorney. Attorney directories are available through state and local bar associations. Contact information for these organizations is available through the American Bar Association.
Make sure you comply with the Fair Debt Collection Practices Act and any state law governing the manner in which you proceed to collect a debt. A copy of the Fair Debt Collections Practices Act can be found at the website maintained by the Federal Trade Commission.
