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Dealing with late mortgage payments

California homeowners can face serious consequences in civil litigation over late mortgage payments. Foreclosure can cause serious financial consequences. Mortgage payments are usually due on the first day of each month, but extensions can be granted until the fifteenth of the month before a late fee is charged. Late fees may be charged for each month a payment is missed or if a homeowner goes into default or is 30 days late.

When a payment is missed, the loan becomes past due and may be reported on a credit report. One missed or late payment on a credit report can reduce a homeowner's credit score. A homeowner may remedy a late payment caused by a temporary financial hardship under a reinstatement plan. The homeowner just repays the amount owed and no formalized plan is needed.

Another option is a forbearance plan where a temporary financial hardship, such as a natural disaster, prevented payment, but the homeowner will return to their income level in a few months. The homeowner pays a reduced amount during the hardship. However, the mortgage will continue to accrue interest and arrearages must be paid when the forbearance plan is concluded.

A repayment plan may be appropriate when the homeowner missed some payments but is able to pay more than the monthly mortgage payments over the next few months to make up missed payments. The homeowner makes increased payments, normally for two to six months, until the debt becomes current.

Homeowners who are making less money, have increased expenses or lost a spouse through death or divorce may seek a modification. This reduces the monthly payment to an affordable amount and makes the loan current by adding the missed payments to the owed amounts. Before approval, this often requires a three or four-month trial plan of consecutive on-time payments.

A homeowner who cannot afford monthly payments and owes more than their home is worth may consider a short sale. They can sell their home and manage this process.

Finally, a deed in lieu of foreclosure applies to a homeowner who cannot afford their monthly payments and does not wish to participate in its sale. The homeowner relinquishes ownership in return for all or part of the mortgage debt.

Source: U.S. Department of Housing and Urban Development, "Homeowner's guide to success," Accessed Dec. 24, 2017

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Mohajer Law Firm, APC

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