What Happens if You Fall Behind on Your Mortgage?

Late Charges and Notices

Failure to make a mortgage payment may result in late charges and notices from the loan servicer.

Key Facts

Late Charges and Notices: If you miss a mortgage payment, a late charge may be assessed on your payment. The loan servicer will typically send you a notice or attempt to make contact with you.
Pre-Foreclosure Notice: If your mortgage is for a home you live in, the lender or loan servicer must send you a pre-foreclosure notice at least 90 days before commencing foreclosure. This notice gives you the opportunity to work with your lender to find an alternative to foreclosure. It will also provide information on how much you must pay to bring the loan current and contact information for housing counseling agencies.
Demand or Breach Letter: If you are 45-60 days behind on your mortgage payments, the loan servicer will send a “demand” or “breach” letter, notifying you that the terms of the mortgage have been violated. You will typically be given 30 days to pay the delinquent amount and the late charge.
Foreclosure Proceedings: If you continue to fall behind on your mortgage payments, the loan servicer may begin the process of bringing a legal action for foreclosure. This can involve referring the loan to its foreclosure department, hiring an attorney, recording a formal notice of foreclosure with the court, and serving you with a summons and complaint. The foreclosure process can take several months.
Foreclosure Sale: Once a foreclosure action has been initiated, a foreclosure sale may occur. The sale is usually conducted through a public auction, where the property is sold to the highest bidder. After the sale is complete, the winning bidder takes ownership of the property, and you lose your house. In New York, the foreclosure process currently takes about 445 days from the date of the first missed payment to the sale of the home.

Pre-Foreclosure Notice

For owner-occupied homes, lenders must provide a pre-foreclosure notice at least 90 days prior to initiating foreclosure. This notice outlines the amount required to bring the loan current and offers contact information for housing counseling agencies.

Demand or Breach Letter

After 45-60 days of missed payments, a “demand” or “breach” letter is issued, highlighting the violation of mortgage terms. A 30-day grace period is typically given to cover the delinquent amount and late charges.

Foreclosure Proceedings

Continued missed payments may lead to the initiation of foreclosure proceedings. This involves legal action, hiring an attorney, and filing a notice of foreclosure with the court.

Foreclosure Sale

If foreclosure proceedings continue, a foreclosure sale may occur. The property is sold at a public auction, and the highest bidder takes ownership. The homeowner loses their house upon completion of the sale.

Sources

FAQs

What happens if I miss a mortgage payment?

**Answer:** Late charges may be assessed, and the loan servicer will typically send a notice or attempt to contact you.

How long do I have to catch up on missed mortgage payments before foreclosure proceedings begin?

**Answer:** Lenders must provide a pre-foreclosure notice at least 90 days before initiating foreclosure for owner-occupied homes.

What is a “demand” or “breach” letter?

**Answer:** This letter is sent after 45-60 days of missed payments and notifies the homeowner that they have violated the terms of their mortgage. A 30-day grace period is usually given to cover the delinquent amount and late charges.

How long does the foreclosure process take?

**Answer:** The foreclosure process can take several months. In New York, it currently takes about 445 days from the date of the first missed payment to the sale of the home.

What happens at a foreclosure sale?

**Answer:** The property is sold at a public auction, and the highest bidder takes ownership. The homeowner loses their house upon completion of the sale.

Are there any options to avoid foreclosure?

**Answer:** Yes, there are options such as loan modification, forbearance, and repayment plans. It is important to contact your lender as soon as possible to discuss these options.

What is forbearance?

**Answer:** Forbearance is a temporary suspension or reduction of mortgage payments, typically for a period of three to six months. During forbearance, the account is marked as current and paid.

What is a loan modification?

**Answer:** A loan modification permanently changes the terms of an existing home loan, such as extending the loan term or reducing the interest rate. This can make the monthly payments more affordable.