On behalf of Mohajer Law Firm, APC posted in civil litigation on Wednesday, December 27, 2017.
California homeowners can face severe consequences in civil litigation over late mortgage payments. Foreclosure, in particular, can cause long-lasting financial damage. Mortgage payments are generally due on the first day of each month, but grace periods are often granted until the fifteenth before a late fee is imposed. Late fees may then be charged for each month a payment is missed, or if a homeowner falls into default by remaining 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, which is often utilized when a temporary financial hardship, such as a natural disaster, prevents payment, but the homeowner expects their income to recover within a few months. Under this plan, the homeowner pays a reduced amount during the hardship. However, the mortgage will continue to accrue interest, and the accumulated arrearages must be paid when the forbearance period concludes, an issue that sometimes necessitates advice from a real estate litigation attorney in Arcadia.
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 earning less money, facing increased expenses, or have lost a spouse through death or a divorce that involves complex property division may seek a loan modification. This process reduces the monthly payment to a more manageable amount and brings the loan current by adding the missed payments to the total balance owed. Before final approval, lenders often require 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.