Late Mortgage Options

Your lender has several options if you're behind on mortgage payments.

If you are falling behind on your mortgage, you need to act quickly to maximize your options. As soon as you miss even one payment, your credit score falls. After 90 days of nonpayment, the lender may file a "notice of default" with the local courthouse and send you a letter stating that if you do not pay, you risk foreclosure.

Repayment Plan

With a repayment plan, your lender recalculates your mortgage schedule so you can catch up on late payments. The lender adds the overdue payment amount to your loan and lets you pay portions of it with your future mortgage payments. In effect, your future payments may be slightly higher. This option suits you if you previously couldn't make the payments due to a temporary hardship, but you can now afford your mortgage payments.

Loan Modification

A loan modification makes your mortgage payments more affordable so you can comfortably meet your debt obligations. The lender changes the terms of your loan, for example, by reducing the interest rate or increasing the loan period. In effect, each of your payments is lower. This option suits you if you have a more permanent financial hardship that makes it difficult for you to make the same payment amount as you previously did.

Short Sale

If you can't or don't want to keep your home, you may be able to give it up through a short sale and relieve the financial pressure of paying a mortgage. In a short sale, you sell your home and use the sale proceeds to pay off your mortgage. Even if the sale price is lower than the outstanding mortgage loan amount, the lender accepts it and does not demand any more payments from you. This option suits you if your loan balance is higher than the home value.

Deed in Lieu of Foreclosure

With a deed in lieu of foreclosure, you give up ownership of your home to your lender. The lender releases you from your mortgage and you don't have to pay any amount you still owe on the property. This option will work well for you if you can't sell the property for as much as your outstanding loan amount, but you have some equity in the property. However, you need to try to sell the property first and prove that you have a serious financial hardship before your lender will agree to a deed in lieu of foreclosure.

References

• MSN Money; Facing Foreclosure? 9 Options; Liz Pulliam Weston
• Wells Fargo: Help for Homeowners