- Reinstatement: Your lender may be willing to discuss accepting the total amount owed in one lump sum by a specific date. They will often combine this option with a forbearance.
- Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time so that you may catch up to your payment schedule. Forbearance may be an option if your income is reduced temporarily, but you know you will have enough money to bring the account current at a specific time in the future, such as for disability leave.
- Repayment Plan: You may be able to get an agreement to resume making your regular monthly payments in addition to a portion of the past due payments each month until you are caught up.
Claim Advance: If your mortgage is insured, you may qualify for an interest-free loan from your mortgage guarantor to bring your account current. The repayment of this loan may be delayed for several years.
Mortgage Modification: This option is an appropriate solution for individuals with long-term or permanent payment difficulties. If you can make the payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to change one or more terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:
- Adding the missed payments to the existing loan balance.
- Changing the interest rate, including making an adjustable rate into a fixed rate.
- Extending the number of years you have to repay.
Home Affordable Modification Program (HAMP): The Obama Administration set up this program in the midst of the subprime mortgage crisis to help eligible home owners with loan modifications on their home mortgage debt. You may qualify for a loan modification under this program if:
- Your home is your primary residence.
- You owe less than $729,750 on your first mortgage.
- You got your mortgage before January 1, 2009.
- Your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner’s association dues, if applicable) is more than 31 percent of your current gross income.
- You can’t afford your mortgage payment because of a financial hardship, like a job loss or medical bills.
Chapter 13 Bankruptcy: If you and your lender cannot agree on a solution, you may want to file for Chapter 13 bankruptcy. If you have a regular income, Chapter 13 may allow you to keep property, like a mortgaged house or car, that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income toward payment of your debts during a three-to-five-year period, rather than surrender the property. After you have made all the payments under the plan, you receive a discharge of certain debts. While bankruptcy sound like an appealing option, it’s best to exhaust all other options before filing; bankruptcies can stay on your credit report for up to 10 years, and once you file you cannot file again for a set amount of time. Choosing the right bankruptcyfiling is also essential to effectively managing and discharging your debt.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.