Mortgage Advice
Mortgages

Understanding Mortgages: What is Delinquency?

(7/13/2012) In the midst of one of the most uncertain real estate markets in history, it’s more important than ever to be informed. In a continuing series, we take a look at some of the most pressing questions about mortgages, refinancing, home equity, and other real estate options available to you.

As part of many of the most common housing market indicators , like foreclosures, underwater homeowners, and more, the term “delinquent” is always a part of the discussion. In fact, delinquencies have been a highly scrutizined statistic in recent month as a weathervane for the status of the housing market .

When a mortgage is considered delinquent, the borrower has failed to make payments as required in the original loan documents. A borrower can be considered delinquent right away - if one monthly payment is not submitted by the agreed upon due date, delinquency has occurred.

There are levels of delinquency. If one payment is missed, borrowers may often catch up right away and simply pay a late fee. If two or more payments are missed (60, 90, or more days delinquent), things become more serious. Lenders may report delinquency to credit bureaus, which then lower credit scores. This can negatively impact borrowers’ ability to get future loans, causing delays or outright denials.

Lenders may also initiate collection procedures, which may ultimately result in starting foreclosure proceedings. If delinquency continues and no payments are being received, the lender can repossess the property.

Delinquency and all the negative associations with it can be avoided, experts say. Simply contacting a lender and discussing the potential problems with making a payment that month or in the future can result in a deferral for a certain time period. Lenders prefer granting deferrals rather than having defaults.

Additional ways to avoid delinquency are to refinance a loan, which can result in a more affordable monthly payment.