 Missed
mortgage payment? Catch up, pronto
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 Dear
Debt Adviser,
How can I catch up on a mortgage payment? I have fallen
behind and have no options, such as extension, refinance, deferral, debt consolidation
loan, etc., available to me. Also, apparently, I am not allowed to pay partial
payments to catch up the payment. I have a job with available overtime, so I know
I can make a little extra money this way, but I am also behind with other bills.
Any advice? Thanks so much.
-- Robyn
 Dear
Robyn,
You and millions of other Americans are dealing with mortgage problems,
and it is no surprise that costly mistakes are being made. Mortgage
debt is a different animal from what most of us are used to. I urge
all my readers, especially those who are caught with negative amortizing
mortgages, payment-option adjustable-rate mortages, interest-only
loans or what are called "exotic
mortgages," to read on and take some notes before this animal
bites you.
Simply put, if you default, the lender can take your
home and sell it to get its money and expenses back. Unlike credit
card debt, which is unsecured, a default can start an expensive
and relentless foreclosure process. I know of one loan that went
into foreclosure when the borrower missed the payment grace period
by a week! Most lenders allow 90 days before they pull the plug
and "accelerate" your loan -- meaning they demand payment of the
outstanding loan balance. Also, most people don't know that once
they are late with one payment, any grace period goes away and all
payments are due on the agreed-upon date, not 15 days later.
Pay,
pay, pay that mortgage
So, what to do when you're late? Pay
the mortgage, pay the mortgage, pay the mortgage. As soon as you can. Don't pass
Go. Don't collect $200. You need to get current with your mortgage before things
get worse. I suggest you contact your lender. Most lenders do not want to be in
the property management business and will work with you to avoid
foreclosure. Ask for a repayment plan that would allow
you to make current mortgage payments while paying a portion of the missed payment
each month for a specified period. You might also qualify for forbearance, in
which your lender would suspend payment for a temporary loss of income due to
illness or injury or other such reason for missing the payment.
I am not usually a fan of skipping other bills to
pay off your mortgage, but assuming you can afford your mortgage
and just need to catch up, you may have to temporarily hold off
on other payments. Pay what you owe to get your mortgage current,
and be sure to let your other creditors know that you have had a
financial hardship and will be missing or making a short payment,
but will get current as quickly as possible.
Look hard at your
budget
The fact that you are behind on other bills as well as your mortgage
leads me to believe that you may need to rethink staying in your
home. Be honest about your financial situation, and if you cannot
afford the home, ask the lender for forbearance in order to sell
your home. This would only work if what the house would sell for
is more than enough to pay off your mortgage, including the late
payment and any fees or penalties.
Another
option if you cannot afford to stay in your home is to ask the lender to accept
a deed in lieu of foreclosure, which means you surrender your home to the bank
and avoid foreclosure proceedings and costs. However, if your home does not sell
for enough to cover the balance of your mortgage loan, you will be responsible
for the difference. A final option would be to contact an attorney
to ask about filing a Chapter 13 bankruptcy to stop all collections, foreclosure
or other procedures from moving forward and spread your mortgage arrears over
a longer period. I would not recommend doing this unless every other avenue has
been explored first. Good luck!
The Debt Adviser, Steve Bucci, is the president
of Money Management International Financial Education Foundation
and the author of "Credit
Repair Kit for Dummies." Visit MMI
for additional debt advice or to ask a question of the Debt Adviser,
go to the "Ask the Experts"
page and select "debt" as the topic.
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