When life pushes back and your finances take a hit, you might fall behind with your mortgage payments. And although the word “delinquent” may conjure visions of someone who’s run afoul of the law, it also simply characterizes mortgage payments that are overdue. If you find yourself in a delinquent status with your mortgage, proactively working with your lender to set up a mortgage loan reinstatement agreement could be the best move to prevent foreclosure.
TL;DR (Too Long; Didn't Read)
It’s not always easy to reinstate a mortgage if you’re in default, but it’s possible if you have an agreeable lender and enough cash on hand to cure the amount in arrears.
How Mortgage Reinstatement Works
If you can pay the total amount of your past-due mortgage payments by a specific date, agreed to by your lender, you’ll be able to bring your mortgage current. And once your mortgage is current again, you’ll simply keep making your regular payments on time to remain in good standing and prevent foreclosure.
A mortgage reinstatement can help you get your financial feet back on the ground after experiencing a temporary hardship such as loss of your job or illness. You may also have a temporary financial challenge, perhaps due to seasonal income fluctuations or an irregular income because you’re self-employed.
Working With Your Lender
The communication you have with your lender during difficult financial times is key to a successful mortgage reinstatement. What’s at stake – your home – is a pretty big thing to lose if foreclosure happens. Because reinstatement is a matter of timing before the window of possibility closes, and it can vary depending on the lender, don’t be afraid to approach your lender and ask for help. And don’t forget important documentation in the form of a certified letter you send to your lender, which substantiates the conversation you had when you met with your lender by phone or in person.
Requesting a Catch-Up Quote
As you’re working with your lender to resolve your delinquent mortgage payments, ask for a written quote that details exactly how much you’ll have to pay to bring your mortgage current. Also ask for how long the quote is effective; for example, you'll want to know the specific date by which the quoted figure will be accepted.
The amount you owe may be significantly higher than just the mortgage payments alone, depending on when you request a mortgage reinstatement. The reason for the discrepancy is because you’ll likely owe some fees and administrative costs. To cover all the bases, your lender’s quote should include the amount you owe in back payments as well as your current payment, the amount of any late fees, the amount of attorney fees and other legal fees your lender may have incurred to pursue foreclosure proceedings and a fee for canceling the sale of your home (if any).
Timing Is Everything
Although mortgage reinstatement can stop foreclosure proceedings, reinstatement after foreclosure is completed, resulting in the sale of your home, won’t work. This is why it’s crucial to be proactive instead of reactive, negotiating with your lender before proceedings escalate to a critical state.
There are situations, however, when reinstatement may not be your best option. If your financial obstacle is more permanent than temporary, you may choose to explore other options with your lender, including a loan modification or refinance. You can also talk to your attorney or your financial planner for expert advice if you’re unsure of the best option that’s available to you for your specific financial situation.
Victoria Lee Blackstone was formerly with Freddie Mac’s mortgage acquisition department, where she funded multi-million-dollar loan pools for primary lending institutions, worked on a mortgage fraud task force and wrote the convertible ARM section of the company’s policies and procedures manual. Currently, Blackstone is a professional writer with expertise in the fields of mortgage, finance, budgeting and tax. She is the author of more than 2,000 published works for newspapers, magazines, online publications and individual clients.