/automatic-payment-enrollment-form/Delinquency on a loan can do long-term damage to your finances. Here are some tips you can use to help avoid delinquency—or recover from it when it happens.
“Delinquent” is a Latin word that dates back 2,000 years—and it basically means “falling short”. Your mortgage loan is considered delinquent when you fall short of making your payment by its due date.
Delinquency trouble can start with a single late payment, and it often gets out of control quickly. After your account is 15 days delinquent, you’ll have to pay a late fee—depending on the state you live in, that fee can be as much as 3 to 5 percent of your total past-due balance. After 30 days, your delinquency will start having a negative impact on your credit score, and other fees and costs may be incurred as well.
What can you do to resolve the situation? Should you put off a car payment? Turn to your savings or a 401k loan?
These are hard decisions. If your delinquency continues and we haven’t worked out a plan, we may be forced to begin foreclosure.
So what’s the best way to avoid delinquency? And what can you do if your loan is already delinquent—or looks like it may become delinquent? Read on for a toolkit of proven guidelines.
Avoiding delinquency
Many delinquencies can be avoided by employing these financial management tactics:
- Pay with autodraft. Experts agree that the best way to avoid late or missed payments is to allow your loan servicer (that’s us) to automatically withdraw your payment directly from your bank account. Just make sure you have enough money in your bank account on the day the autodraft takes place. Setting up autodraft payments with us is easy: Fill in a simple form that you download from our website. To set up monthly autodraft payments, download our Automatic Payment Enrollment Form. For biweekly payments, use our Biweekly Automatic Payment Enrollment Form. To learn more about autodraft, refer to this helpful article.
- Create a budget. A budget is not a financial prison. By creating a budget you know and control where your money is going. A well-designed budget is your ticket to financial freedom. Especially when you’re faced with financial challenges, you need to know exactly what your expenses are. That way, you’ll be better able to decide how to free up the funds to make your mortgage payment—and keep your loan out of delinquency. Learn the basics of personal and family budgeting.
- Set aside short-time savings. We all have to deal with financial emergencies from time to time. For example, you never know when big-ticket home or car repairs will pop up. And if you can’t pay those expenses upfront, you’ll have to take on more debt—which puts even more stress on your finances. The key is to carve out some money every month to hold in short-term savings—your “emergency fund.” Here is a set of practical financial-planning tips (including short-term savings guidelines). You can also refer to the budgeting article mentioned above.
Dealing with delinquency
Are you facing delinquency? Have you already missed a payment or two? Engaging with us as soon as possible is the first step toward fixing the situation. If you’ve missed a payment—or if you even think you might miss a payment—here’s what you can do to resolve the situation:
- Call us. First and foremost: Tell us about your situation right away. We represent your lender, and we can tell you for certain that we want to work with you. No matter what you may have heard, your lender is not in the real-estate business and they do not want your house. Lenders (and loan servicers like us) make money only when you make your loan payments, and foreclosure is an expensive and tedious hassle that almost always ends up as a loss. So don’t wait until you've missed two or three payments before you act. You can reach us Monday - Friday from 8 a.m. - 9 p.m. Our Saturday hours are 10 a.m. - 2 p.m. (all Eastern time). Our toll-free number is 800-365-7107.
- Work with us to find a solution. We specialize in helping homeowners find practical solutions to their payment challenges. And we have a wide range of payment alternatives, including repayment, forbearance, deferment, refinancing, modification, short sale, and deed-in-lieu-of-foreclosure. We’ll work closely with you to try to develop a plan that works for you and your family.
- Meet with a free financial counselor. After you talk with us, you should also talk with a free, certified financial counselor. The U.S. Department of Housing and Urban Development (HUD) sponsors free counseling agencies nationwide. They’re specially trained to review your situation, uncover options, and create a plan to get you the help you need. They can provide unbiased advice about all kinds of financial topics, including mortgage delinquency—and much more:
- Meet with a general financial counselor. For general financial counseling, this HUD website provides a national map. Simply click on your state to get a state-wide list of counselors. Then use the “Narrow your search” function to find a specific type of counselor (such as mortgage delinquency or debt repayment). You can also list counselors by city or ZIP code. Or you can call HUD toll-free, day or night, at 800-569-4287 (TTY: 202-708-1455).
- Get foreclosure-specific counseling. HUD has a foreclosure-specific website that can help you find a certified Foreclosure Avoidance Counselor (FAC) near you. FACs are trained to know the law, help you organize your finances, negotiate with your lender (and/or us), and—hopefully—avoid foreclosure. FACs are partly funded by HUD, and all of their services are free.
- Get counseling by phone. If you prefer phone-based counseling, call the toll-free HOPE Hotline that’s sponsored by the Homeownership Preservation Foundation (HPF). Their number is 888-995-HOPE(4673). You can also check out their website, 995Hope, to learn more about their wide range of free, phone-based financial counseling services.
- Are you a veteran? Are you a military veteran or the spouse of a deceased veteran? If so, the U. S. Department of Veterans Affairs (VA) will provide free financial counseling—even if your loan isn’t a VA-direct or VA-backed loan. You can speak with a VA “loan technician” toll-free by calling 877-827-3702. You can also email the VA at VBACO@va.gov (be sure to include the name and address listed on your loan agreement).
- Think of foreclosure as a last resort. Don’t be quick to give in to foreclosure. We see foreclosure as the last resort—and you should, too. That’s because foreclosure stays on your credit report for up to seven years. And it may be as much as four years before you’ll be able to get any credit at a normal interest rate. Please call us right away and let us help you resolve your delinquency.
Summing it up
Making on-time payments is the only sure way to avoid mortgage delinquency, so please consider the suggestions we mentioned above.
If your finances do get out of control and you can’t make your mortgage payment—or if you even think there may be a problem on the horizon—call us immediately so we can work with you to try to resolve your delinquency. Remember: We do not want to take your home. We’re committed to doing everything we can to help you find a way to make your payments, stay in your home—and avoid foreclosure.