A delinquent mortgage is a home loan for which the borrower has failed to make payments in accordance with the terms of the loan agreement. When a mortgage payment is not made by the due date, the mortgage is considered delinquent. If the borrower cannot bring the mortgage payments current within a specified time frame, the lender may initiate foreclosure proceedings. When a mortgage becomes delinquent, or is about to become delinquent, a lender may also offer a borrower additional options to prevent foreclosure.

What is Delinquent Mortgage?

• A delinquent mortgage is a home loan for which one or more required payments have been missed.

• Defaulting borrowers are frequently subject to late fees and can experience a negative impact on their credit score.

• Mortgages that are delinquent for an extended period of time risk defaulting. The lender might then foreclose on the property.

• Lenders will sometimes work with delinquent borrowers to assist them in avoiding foreclosure.

How Mortgage Delinquency Work?

When a borrower fails to make payments or misses due dates, the mortgage is considered temporarily delinquent. At this point, the lender will typically assess late fees, the amount of which can vary depending on the lender and mortgage terms. If the lender does not initially assess a late fee, this does not mean that the mortgage is not delinquent; some lenders may wait until a payment is over 30 days late before assessing fees.

A delinquent mortgage can result in foreclosure, but this is typically a lender's last resort due to the lengthy and expensive legal process involved. A forbearance agreement is a possible alternative to foreclosure if the borrower is experiencing temporary financial difficulties. Under the terms of a forbearance agreement, the lender permits the borrower to temporarily stop making payments or to pay less than the monthly payment amount.

How Mortgages Become Delinquent?

Most mortgages become delinquent when the borrower experiences additional financial difficulties that make it difficult or impossible to make payments. This could be a job loss, an expensive illness, or a divorce.

This is one reason why it can be advantageous to maintain an emergency fund.

What To Do When Your Mortgage Is Delinquent

When a borrower suspects that they will be unable to make a timely payment, they must immediately contact their lender. In some instances, the lender may have the ability to completely prevent delinquency.

The borrower's credit score and ability to obtain loans in the future can be negatively impacted by a delinquent mortgage payment; therefore, borrowers must make every attempt to pay their mortgage on time.

A homeowner with such a delinquent mortgage who does not believe their financial difficulties are temporary and who wishes to avoid foreclosure may request a short sale from the bank. This occurs when a borrower owes more than the current market value of the home. The bank consents to the borrower selling the property for less than the outstanding mortgage balance and remitting the difference to the bank. In some states, the bank is required to forgive the difference; in others, the homeowner is responsible for paying it. This is occasionally known as a deficiency judgement.

A borrower who has been delinquent on their mortgage for a number of months, but has not yet been foreclosed upon, may agree to a repayment plan with the lender in order to eventually become current on the mortgage and avoid foreclosure. In order for the borrower to be able to afford the monthly payments, the lender may also agree to a loan modification, such as a change in the principal amount, loan term, or interest rate. A borrower with an adjustable-rate mortgage may also be able to refinance into a fixed-rate mortgage with a lower interest rate.

If you need assistance determining what to do, a counseling service for foreclosure prevention may be able to assist you. These services are provided for free by nonprofit organizations.

If affected by COVID-19, homeowners whose mortgages are held by Fannie Mae and Freddie Mac, which together guarantee more than two-thirds of all mortgages, may be eligible for special, temporary forbearance plans.

Refinancing a Delinquent Mortgage?

You can, in some situations, refinance a delinquent mortgage. However, keep in mind that your missed payments make you a less desirable borrower in the eyes of lenders. This can make it more difficult to obtain a new loan, and any loan you are offered is likely to carry a higher interest rate.

Consultation with your current lender should be your primary option. It may be eager to refinance your mortgage or, more inclined, modify your current mortgage to make it more affordable rather than foreclose.

Delinquency vs. Default

Insolvency is a more serious issue. A notice of default is a public document filed with a court indicating that a mortgage borrower has been delinquent for an extended period of time. This is one of the initial steps in the foreclosure process. If a borrower does have multiple delinquent payments, they are at risk of defaulting on their mortgage, which could result in the loss of any home equity.

A mortgage contract should specify the number of missed payments permitted before the lender initiates default proceedings. Before filing a notice of default, most mortgages will permit up to 180 days of missed payments and delinquencies.

When is the Mortgage Delinquent?

When a borrower misses or is late on one or more mortgage payments, the mortgage becomes delinquent. The situation can become increasingly dire the more payments you miss.

What Happens if Mortgage is Delinquent?

For starters, your lender might charge you late fees. If you continue to miss mortgage payments, the lender may eventually declare your mortgage in default and initiate foreclosure proceedings to seize and sell your home.

How Can I Prevent Being Delinquent on My Mortgage?

If possible, make your mortgage payments on time. Set up an automatic payment system or create reminders for yourself if you have a tendency to forget. If you anticipate being unable to make a payment due to a lack of funds, you should contact your lender, explain the situation, and see what arrangements can be made. You may be eligible for a loan modification, for instance. Most lenders would rather assist you in getting back on track than initiate a lengthy and expensive foreclosure process.