In order to know how much time you have available before you lose your home to foreclosure, you need to know a bit more about the banks’ processes and timelines. Here is a typical scenario from first falling behind to the bank offering the property for sale.
First, a homeowner misses a payment. This will initiate a nonstop barrage of phone calls and letters that will not stop until the bank owns the property or the homeowner gets totally caught up. If a borrower writes to his or her bank requesting that the bank only communicate through written correspondence and stop calling completely, the bank will have to comply. You will still be responsible for making your payments, however, even if you get the bank to stop calling you.
30 days after missing a payment, the bank will begin reporting derogative payment history to the borrower’s credit report. Besides the damage to credit and the phone calls, nothing much else will happen at this point. This is a great time to begin a modification. Typically sometime during the first month or two, the bank will transfer the internal loan management out of the general collection and customer service rep’s hands and into the Loss Mitigation, or Loss Mit, Department. This is a good thing, because this is the department that retains the ability to modify loans. You can always talk to the Loss Mit department before the file officially makes it into their hands, but some banks will try to prevent you from ever actually communicating with that department in the early stages. Sooner or later, however, they’ll require it.
Not a whole lot more will typically change when a borrower falls two months behind on his or her payments. The second month is also a great time to begin the loan modification process. After the first two months is when things can begin to get hairy. Some lenders will send a Notice of Default (NOD) as soon as the loan is 61 days past due, though occasionally these won’t be sent until the borrower is four or even five months past due. The better and longer the borrower’s payment history, and the better he or she has been about communicating with the lender, the longer the lender will take before sending an NOD.
A default notice is a letter requiring that the borrower pay all past due amounts and late fees within 30 days or else further action can and will be taken. Once an NOD has been received by the homeowner, the modification process can get more difficult, because some lenders will stop negotiating until the loan is caught up. Then, if the loan is caught up completely, the lender won’t do a modification unless and until the borrower falls behind again. Never stop making payments if you can help it, even though that can help you get a mod done, because the further you are behind, the more difficult it will be to get caught up if the modification is unsuccessful. Besides damaging your credit even worse, deliberately stopping making payments is a great way end up losing your home to foreclosure.
