How to Recover from a Mortgage Default

This comes as a surprise to some homeowners, but lenders really are reluctant to foreclose on a home. Foreclosure is a complex process and it’s one on which a lender rarely makes a profit. The reason a lender pursues foreclosure is not to be mean, but rather to limit its losses on a loan which has gone into default.

That’s why it is so important to contact your lender at the first sign that you may have trouble making your mortgage payments. As long as you have been responsibly honoring your financial obligations, chances are your lender will work out a mortgage repayment plan that’s tailored to your current financial situation. If you’ve missed payments or have a pattern of making late payments, your lender won’t be as cooperative.

There are ways to prepare for your talk with the lender. The more prepared you are, the better your chances of finding a solution that truly will help you hang on to your home. Preparing will take time so the sooner you get started, the better.

Your lender will want to know how much money you have coming in each month and how much you have going out. Be accurate and be truthful with your figures and include everything. Start by putting together a list of all your liabilities, the amount of each, and when they’re due. Next list your assets, the things that you own. Gather proof of all current income such as stubs from pay checks, unemployment checks, etc. Also round up your income tax statements from the previous two years. Have an independent professional determine the estimated value of your property as well. A local realtor can usually get this for you by analyzing comparable home sales in your area.

Finally, put together an explanation of your current financial situation and put it in writing. If you have ideas on how you can get current on your mortgage current, add these plans to the letter you’re writing to the lender.