Falling behind on mortgage payments can result in some very undesirable consequences. Depending on the amount that is due, and the arrangement between lender and the borrower, consequences can range from slight penalties to very drastic legal actions.
For the borrower, the consequences of being behind on mortgage payments can include:
- Late payment fees
- Real estate liens (an order allowing the borrower to take possession of title in order to satisfy the payment)
- Repossession from collection agencies
Thus, it is advisable not to fall behind on mortgage payments, because it can be more troublesome to deal with the consequences than it is to pay the monthly rates.
In many cases, lenders are willing to reach some sort of compromise with the borrower. For example, they may allow them some time to gather their resource and make up for the back payments. However, in serious cases, the lender may opt to file a legal claim against the borrower to recover the payments (or the value of the payments).
Even still, there may be some foreclosure alternatives available to the lender, such as:
- Loan Modification: This is where the lender adjusts the monthly payments in order to help the borrower keep up with payments. This might keep payments on a monthly basis, but may not actually deal with past payments due
- Reinstatement: This is where the borrower simply pays back all the missed payments in full. This might be a good option if only one or two payments were missed
- Repayment Plans: Here the lender actually increases monthly payments by a small portion, so that the borrower can eventually make up for any missed payments in the past
- Forbearance: Under some federal and state laws, certain debts can be subject to forbearance. This is where the monthly payments are paused for while, to allow the person to gather their finances. Interest rates may still be charged during the suspension period, and they are often increased interest rates
- Bankruptcy: As a last resort, bankruptcy can often have the effect of discharging mortgage debt
Lastly, if the person is already facing foreclosure, they may have some remaining foreclosure alternatives available, such as a deed-in-lieu transfer or similar transaction. These can generally be complicated and may require the assistance of a qualified real estate attorney.
Many may feel that working with a lawyer may be an unnecessary expense in a time when they are already hard pressed, financially speaking. However, it can happen that a person ends up spending more money or actually losing their home because they didn’t understand how mortgage debt operates. Thus, working with a lawyer can help you avoid making mistakes that might be costly in the future.
For example, many people might feel pressured when speaking with mortgage lenders, especially if they aren’t very knowledgeable of mortgages. Having a lawyer present during negotiations can prevent instances of coercion, abuse, or fraud, which have become more prevalent in the past decade. Also, an attorney can help you understand all the various options available to you given your financial background.
If you have fallen behind on mortgage payments, it’s best to address the situation early on before the situation gets worse. It may be in your best interests to hire a real estate lawyer for help with mortgage issues. If you need to go to court or make a court appearance, an attorney can provide you with expert representation and legal advice during the proceedings, and can help find the most suitable options for you.