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Behind On Mortgage Payments? Retrieval Is Still Possible...

Falling back in mortgage payments can happen to anyone. You may fall behind on mortgage payments for a variety of reasons-- unexpected expenses, unemployment, overspending, illness/injury, disability, divorce, education, and relocation. While it affects a person’s reputation adversely and causes a dip in one’s credit rating, or results in a foreclosure, the situation is not irretrievable. So it is important to set aside despair and look at the situation in a proper perspective.

First evaluate whether your falling behind on mortgage payments is long term or short term problem. If short term, you could negotiate with your lender for new terms. If the financial crisis is long term, consider the following options:

  • Mortgage refinance-- the lender advances more moneys against the property
  • Sale--the property is sold by mutual consent and lender collects the mortgage dues.
  • Assumption - the buyer takes over the mortgage debt and makes the mortgage payments
  • Short sale - the lender allows the borrower to sell the property under lien for an amount less than the loan and accepts the sale proceeds as full and final settlement.
  • Deed in lieu of foreclosure –the title deeds of the property are transferred to thelender in exchange for cancellation of the mortgage debt
    Foreclosure – the lender takes over the borrower’s property
  • Bankruptcy - the borrower files for bankruptcy and his property is sold to pay of the mortgage dues.
What really happens when you fall behind on mortgage payments? How much time do you have?

The first thing that your creditor will do is wait for the expiry of the grace period. If he feels you are financially sound otherwise, he will even wait for a month or two before initiating proceedings for collecting the debt. Thereafter, he will file a "Notice of Default" and this will again provide a breather. The debtor is allowed a three month respite in which to make his mortgage payments current.

Most Creditors are also willing to workout a payment plan with his debtor. A call to the lender explaining the reasons for non payment is often advantageous to you. It will make the lender feel that you are conscious of your moral obligations and would not willingly default on payment. He would be, consequently, willing to help you over the patch so that he can get his money back over time. The process of negotiation with the lender can involve a deal called a "loan modification" deal wherein the creditor and the debtor agree to change the terms and conditions of the loan which could include increasing the period of repayment, reduction in the rate of interest or suspension of payment for a specified period of time till the debtor is able to bring his finances on an even keel.

It is only after all negotiations have failed that the creditor will move for a "Notice of Sale". Even at this stage the borrower can retrieve the situation by making arrangements to pay up the entire amount before the property actually comes up for sale. The property will be sold only as the last resort if the borrower is still unable to meet the dues.

So if you are falling behind on mortgage payments, do not despair. You will find that you have plenty of time to retrieve the situation.

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