Spot a Foreclosure and Stop it from Happening
If your gut is telling you that a homeowner is heading toward mortgage payment default and foreclosure, there’s a good chance you’re right. Luckily, you don’t have to guess. There are ways to spot a coming foreclosure and specific steps that mortgage professionals can take to help clients get back to black.
Here are three signs of foreclosure to look for and tips on how to handle them.
Sign #1: Late Payments
If a homeowner is late on their mortgage payments, it’s a sign they are struggling to make ends meet and may have run out of money. Rather than admit to money problems and work toward a solution, many people opt to ignore the issue completely and simply hope for the best. Even as delinquent mortgage holders try to improve their financial situation, it only gets harder to get caught up the more late payments they have.
Tip: As soon as you see that a homeowner is late on their payments, reach out to them. By being proactive, you don’t have to appear threatening. Instead, be their ally. Listen to their situation and see if there is anything you can do to help them get back on their feet. You may be able to offer different payment options or refinance their home, but sometimes all someone needs is a little support and understanding to see the solution in front of them.
Sign #2: Communication Stops
If communication with your homeowner breaks down 16 to 30 days after a late payment, they are probably trying to avoid you. While it’s possible they’ve just gotten busy or taken an extended vacation, it’s not very likely. They may be working hard to make a payment as soon as possible, but if you don’t hear from your homeowner about their payment in a reasonable amount of time, fear or shame is probably standing in the way.
Tip: Again, try to contact the homeowner and compassionately explain the risks of defaulting on their mortgage, including late fees, damage to their credit score and foreclosure. Ultimately, late payments will only make it harder for them to recover and stay on track. Help your homeowners remember that you are there to offer choices, help them overcome obstacles and provide a path forward to a solution.
Sign #3: Public Default Notice
If a homeowner continuously makes late payments, their servicer can begin the foreclosure process by filing a public mortgage payment default notice. Once a public default notice has been filed, you only have a few options to prevent foreclosure. It is crucial to develop a solution during the pre-foreclosure grace period.
Tip: Foreclosure has profoundly negative effects on both a homeowner’s credit and their emotional wellbeing. Now is the time to develop a workable plan for your homeowner to exit the foreclosure process, and your expertise and support is imperative to see them through it. If paying off the full default amount remains impossible, discuss their options for loan modification, short sale or a deed in lieu of foreclosure that can help them avoid the harshest consequences of their default.