What to do if you have a mortgage default
If you think you might miss your mortgage payment, you should contact your mortgage agent right away to explain your situation and find out what your options are for keeping you in your home. Your mortgage agent is the company you make your payment to and may or may not be your original lender.
Lenders want you to be able to stay in your home if possible. If you’re a Rocket Mortgage customer and need help, know that we’re here to help. Complete our Request for success to ask for help.
Mortgage forbearance involves a temporary pause in your mortgage payment. The general idea here is that you don’t have to worry about your mortgage payment while going through your financial difficulties. This is often the first option offered to many borrowers, particularly if the difficulties are temporary in nature.
There are a few things customers should know about forbearance in advance. First, payments that would have originally been due during the break must be refunded. You may qualify to do so in any of the ways we’ll cover in the following sections. Your options generally depend on your financial situation and the circumstances that led to the forbearance.
Second, a forbearance will generally have a negative impact on your credit. However, this is better than missing several payments and possibly losing your home. There are a few exceptions where your credit is not harmed. Broadly speaking, these would be forbearances related to natural disasters or granted as relief under the provisions of the CARES Act.
If you qualify for forbearance, it’s always best to make as much of your payment as possible. This will help you resolve the mortgage default at the end of the forbearance by increasing the options you may qualify for.
See if you qualify for a deferral or partial claim
In certain circumstances, after you forbear, you may be eligible to delay a certain number of payments until you refinance, sell your home, or pay off your mortgage. Depending on the type of mortgage you have, this is called a deferral or a partial claim. For practical purposes, they mean the same thing from the borrower’s point of view.
Work out a repayment plan with your lender
The next thing to consider to qualify is a repayment plan. Under this option, you pay a little more for your mortgage each month until your outstanding balance is paid off. This is usually set up to happen over a number of months.
Note that these repayment plans are typically 1-3 months and payments can be significantly higher than a regular mortgage payment. This high payment can make it difficult to qualify for a repayment plan, as it can take a toll on your finances.
Modify the original loan
Another qualifying opportunity may be a loan modification. During a mortgage modification, changes are made to the original terms of the loan in order to facilitate payment. As part of a modification, the repayment term of the loan and the interest rate can be changed.
Most changes have an impact on your credit, but not as much as a foreclosure. Exceptions relate to things like COVID-19 forbearances under the CARES Act or those resulting from a natural disaster.