Behind on Mortgage Payments, Foreclosure Pending

If you have fallen behind on your mortgage, you've lost your job, had a major family crisis, or are facing some other unexpected emergency that has hurt your ability to make your monthly mortgage payment AND your lender is threatening foreclosure and eviction, you need to prepare yourself for what is likely to happen next.

The First Two Months

When you miss your first mortgage payment, it's likely that you will receive a call or letter from your lender to notify you of your missed payment and to impress on you the importance of bringing your account up to date. At this point you may be able to secure a loan modification by using your existing mortgage company to refinance the debt or extend the terms of your current loan. The most important step you can take is to stay in touch with your lender.

When you miss your second payment, your lender will likely expect an explanation. It is important to talk to them and explain not only your situation, but what you are doing to correct it. If you can make a payment, now is the time to do so.

The Next Two Months

By the third month you will probably receive a demand letter (or notice to accelerate) requesting that you pay or make other arrangements by a specific date. If you do not comply, your lender will begin foreclosure proceedings. If you talk with your lender now, they may be open to negotiating a partial payment.

If the fourth month rolls around and you still have not paid the full amount or worked out other arrangements, you will probably hear from your lender's attorney. The attorney fees will now be added to your delinquency.

The Last Straw

The final step in the process is foreclosure. When you receive a notice of default it means the lender is giving you notice that either you need to bring your mortgage payments up to date or your home will be sold. You need to know your options.

Depending on the state where you live, you either have a mortgage or a trust deed. That means you generally have from one to ten months before you actually need to vacate the property. You need to resolve the situation immediately or find another place to live.

Some states offer a redemption period which allows you to pay foreclosure costs, back interest, missed principal payments, and any associated fees (such as attorney fees) along with the interest in order to recover the property. The benefit, of course, is that with a redemption period you can continue to live on the property without being evicted, sometimes up to several months.

Your Final Option

If you are in a redemption period, faced with foreclosure and wondering what to do, all is not lost. You do have options. Depending on the laws in your state, you may be able to:

-save money and start a repayment plan (mortgage forbearance agreement)

-receive a loan reinstatement

-refinance your loan with a foreclosure bailout

-sell your home (pre-foreclosure sale)

-get a short sale

-ask for a partial claim (FHA loans)

-request a deed in lieu of foreclosure

Whatever choice you make, it is important to not ignore the problem. Know your rights and know your options. You may also want to contact the U.S. Department of Housing and Urban Development to speak to a FREE HUD housing counselor by calling (800) 569-4287.