When is your mortgage payment late?
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When you bought your home and closed on your mortgage, one of the many documents you signed was a promissory note. If you’re like most borrowers, you skimmed this document at best and at worst you didn’t read it at all. You might want to go take another look. Your promissory note is an important legal document. It’s where you agreed to the amount of your monthly payment, the date payments are due, and where the payments should be sent. It also explains the consequences of failing to pay your mortgage on time.
The format of the promissory note may vary by lender, but many fixed-rate conventional loans use Fannie Mae Form 3200. If you’re having trouble making your mortgage payment, pull out the pile of paperwork from when you bought the home and look for your promissory note. No matter the form used, in it you’ll find information on when your payment is due and what happens when you miss a payment.
In case you missed reading the promissory note or if you just need a refresher, here’s an overview of when your mortgage payment is late and what happens.
Mortgage payments: due dates, grace periods and late fees
On Form 3200, the mortgage payment amount and due date are shown in Section 3, Payments.
It might say something like, “I will make my monthly payment on the 1st day of each month beginning on July 1, 2017,” and show the mailing address for your payments and the amount of principal and interest due monthly.
1 day late
Don’t worry just yet. Most mortgage payments are due on the first of each month. If your mortgage servicer doesn’t receive your payment by that date, the payment is technically late, but you may not suffer any consequences just yet.
That’s because most mortgages have a grace period – or a set amount of time after the due date in which your payment can be made without incurring a penalty. For most mortgages, that grace period is 15 calendar days. So if your mortgage payment is due on the first of the month, you have until the 16th to make the payment. After that, your servicer may charge you a late fee.
15 days late
Your grace period typically ends after 15 days. At this point, your lender may assess a late fee. The fee can be charged each month that you miss a payment.
And that late fee isn’t just a slap on the wrist — Adam Smith, President of the Colorado Real Estate Finance Group in Englewood, Col. said late fees typically run around 4 to 5 percent of the overdue amount.
Section 6, Borrower’s Failure to Pay as Required, of Form 3200 shows your grace period and the late fee that applies. For instance, it might say:
“If the Note Holder has not received the full amount of any monthly payment by the end of FIFTEEN calendar days after the date it is due, the amount of the charge will be 5.0000% of my overdue payment of principal and interest.”
So, for example, if your monthly principal and interest are $1,700, a five percent late fee would be $85.
30 days late
Once you’re 30 days late on your mortgage, your servicer may report the delinquency to the credit bureaus. We’ll delve into the impact on your credit score later on.
By the 36th late day, federal law requires the servicer to try to make contact with you. If they don’t receive a response, the servicer may send a Notice of Default. Procedures for this Notice of Default are also outlined in Form 3200, Section 6 (C):
“If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means.”
In other words, the Notice of Default may give you 30 days’ notice to pay your mortgage balance, plus any accumulated interest, in full.
Despite the harsh wording, in reality, the laws in most states give you more time to work out payment arrangements before foreclosure. Plus, most lenders would rather work with you to get your mortgage payments current.
45 days late
At this point, the government requires your servicer to assign a company staff member to your file. This person is tasked with connecting you to available assistance options and answering any questions you may have. You will receive a written notice of this assignment.
60 days late
By now, you’ve missed two monthly payments and you’ve likely been assessed late fees twice. Your lender has probably called several times, making an effort to discuss why you haven’t made a payment.
If you’re having financial troubles, it may be difficult or embarrassing to discuss, but don’t ignore your lender’s calls. They may be able to work with you or refer you to resources that can help.
90 days late
Once you’re missed three payments in a row, your lender will likely send another, more serious notice, known as a “Demand Letter” or “Notice to Accelerate.” It’s essentially a notice to bring your mortgage current or face foreclosure proceedings.
The process and timeline for foreclosure varies from state to state. You can look up information on your state’s laws and procedures here.
120+ days late
If you haven’t paid the full amount due or made other payment arrangements by the end of the time frame spelled out in the Demand Letter, your lender will refer you to their attorney, who will schedule a foreclosure sale. You’ll receive a notice by mail, have a notice taped to your door, and the sale may be advertised in your local paper.
Per CFPB regulations, your mortgage servicer can start the foreclosure process once you’re 120 days behind on your payments unless you have an active application for a foreclosure prevention option, such as a loan modification or short sale.
You have until the date of sale to make arrangements with your lender to pay the amount owed. You may also be responsible for paying attorney fees.
How a late mortgage payment affects your credit
Once your payment exceeds 30 days past due, the lender may report the late payment to the credit bureaus. Just one late mortgage payment can negatively affect your credit score.
The impact of one late payment will depend on your overall credit history and the credit bureau’s model for calculating your score, but a single 30-day delinquency can drop an otherwise excellent rating anywhere from 50 to 100 points, according to Fannie Mae.
Your credit report will show whether the payment was 30, 60, 90 or more days late. The longer your payment is delinquent, the worse it will impact your score. Going into foreclosure also negatively affect your credit score, and the foreclosure will remain on your credit report for seven to ten years.
Can’t make your mortgage payment? Help is available
“If you cannot make your payment, it’s always best to be proactive,” Smith said. “Call your mortgage servicer and talk to them. Seek out foreclosure prevention assistance and hotlines. Do everything you can but do not ignore the problem.”
HUD maintains a director of approved housing counseling agencies. These experienced and trained professionals can advise you on preventing foreclosure, protecting your credit and other issues.
Whatever your course of action, the housing counselor will explain which documents you’ll need to provide to your mortgage servicer to start the process, and they may even be able to contact the mortgage company on your behalf — and their foreclosure prevention counseling services are available free of charge.
Depending on your situation and whether your financial troubles are short-term or long-term, your options might include:
|Reinstatement||For temporary financial hardships that prevented you from making your monthly mortgage payment. If you now have the money to pay what you owe, you simply pay it. There is no formalized plan.|
|Forbearance||For temporary financial hardships that you expect to overcome in the next few months. The mortgage company agrees to a reduced payment plan in the short term. During this time, the loan continues to accrue interest.|
|Repayment plan||If you missed a few payments but can afford higher mortgage payments for the next two to six months to bring your delinquent mortgage current.|
|Modification||If you can no longer afford your mortgage payment because of a change in marital status, a reduction in income or an increase in expenses. The mortgage company may be able to reduce your monthly payment to an affordable amount.|
|Short sale||If your mortgage balance is worth more than the home is worth, you may be able to sell the house and get your mortgage company to forgive the difference between the sales price and your mortgage balance.|
|Deed in lieu of foreclosure||If you can no longer afford to make your monthly payment and your mortgage balance is worth more than the home is worth, you may agree to turn the property over to your mortgage company rather than go through the foreclosure process. The mortgage company may agree to forgive all or some of the difference between your mortgage balance and the value of the home.|
Sell your home
If your home is worth more than your mortgage balance, selling your home may provide the funds you need to pay off your mortgage balance in full and even leave you with some extra cash.
“In our current market, the values are so high because of the supply and demand issue that nobody is underwater on a home,” Smith says. “You can always sell, pocket some money, and save your credit rating before going into foreclosure.”
If credit cards and other debts are making it difficult to afford your mortgage and you’re unable to work out arrangements with your mortgage servicer, Chapter 13 bankruptcy may allow you to keep your home.
Under Chapter 13 bankruptcy, the court approves a repayment plan to pay off your debts over a three- to five-year period. Your mortgage will not be discharged under a Chapter 13 bankruptcy, but you may be able to reduce or eliminate the amount you owe on credit cards, medical bills, lawsuit judgments, personal loans and other debts.
Chapter 13 bankruptcy will hurt your credit score, and it remains on your credit report for up to seven years from the date filed. To explore your options, talk to an experienced bankruptcy attorney.
If you’re having trouble making your monthly mortgage payment, don’t just sit back and let late charges, delinquent payments and foreclosure happen. There are several options to help you keep your home, or at least limit the financial impact of giving it up. Contact your mortgage servicer or a housing counselor as soon as possible to talk about options. The sooner you call, the more options you will have a service or a housing counselor as soon as possible to talk about options. The sooner you call, the more options you will have.