Can you stop foreclosure by paying the past due amount?

Foreclosure represents a significant challenge for homeowners facing financial difficulties. When mortgage payments are missed, the lending institution may initiate legal proceedings to recover the outstanding debt, which could ultimately result in the loss of the property.

Understanding Reinstatement

Reinstatement allows a homeowner to stop foreclosure by paying a lump sum to bring the loan current. The total amount required for reinstatement encompasses more than just the missed monthly payments; it includes all accumulated overdue amounts. This typically means covering all missed principal and interest payments that have accrued.

Beyond the regular payment components, the reinstatement amount also includes various fees and costs incurred by the lender. Homeowners should anticipate charges for late fees, which accrue for each missed payment. Legal fees, such as attorney fees for filing foreclosure paperwork, and court costs are also added to the total. Additionally, foreclosure-related expenses, like property inspection fees, publication costs for foreclosure notices, and any costs to preserve the property, contribute to the reinstatement figure. If the lender has made any advances for property taxes or insurance premiums through an escrow account, these amounts will also be part of the required payment.

The opportunity to reinstate a mortgage is generally available up to a specific point in the foreclosure timeline. While exact deadlines vary by jurisdiction, this right often extends until a few business days before a scheduled foreclosure sale or before a judgment is entered in judicial foreclosure states. Federal regulations typically require lenders to wait at least 120 days after a missed payment before initiating formal foreclosure proceedings, providing a window for homeowners to explore options like reinstatement. Missing this critical timeframe means the option to reinstate may be lost, making timely action important.

The Reinstatement Process

Initiating the reinstatement process begins with obtaining a precise reinstatement quote from the mortgage servicer. This quote, sometimes referred to as a payoff statement, details the exact amount needed to bring the loan current, including all missed payments, fees, and costs calculated up to a specific “good-through” date. It is important to request this quote in writing to ensure accuracy and to have a verifiable record of the required amount. Verbal quotes should not be relied upon due to their potential for inaccuracy and lack of documentation.

Once the reinstatement quote is received, careful review of all listed charges is advisable. Homeowners should verify that all included fees, such as attorney fees, late charges, and property preservation costs, are legitimate and accurately calculated. If any discrepancies are noted, the homeowner has the right to dispute the amount by sending a written notice of error to the servicer. Acting quickly on any disputes is important, as the quote’s validity is time-sensitive.

Making the payment requires using accepted methods, which typically include certified funds, cashier’s checks, or wire transfers. Personal checks are generally not accepted for reinstatement amounts due to the need for immediate and guaranteed funds. Ensuring the payment is received by the lender before the quote’s expiration date is critical to successfully halt the foreclosure. Keeping meticulous records of all correspondence, payment receipts, and confirmation numbers throughout this process is a sound practice.

Maintaining clear communication with the lender or servicer is also important at every step. This involves confirming receipt of the reinstatement payment and inquiring about the status of the foreclosure proceedings. Diligent follow-up helps ensure that the payment is correctly applied and that the foreclosure action is promptly halted. Without proper communication and documentation, there could be delays or complications in stopping the foreclosure.

After Reinstatement

Upon the successful completion and processing of the reinstatement payment, the foreclosure proceedings are stopped. The mortgage loan is brought back to a current status, effectively curing the previous default. This means the threat of losing the home through the ongoing foreclosure action is removed, and the homeowner retains ownership.

It is important for the homeowner to receive written confirmation from the lender that the loan has been reinstated and that the foreclosure has been canceled or dismissed. This documentation serves as proof that the account is current and that the legal action has ceased. Without this written confirmation, there could be future misunderstandings or complications regarding the loan’s status.

With the loan reinstated, regular mortgage payments will resume according to their original schedule. The next payment will typically be due in the following month, as if no default had occurred. Homeowners should ensure they are prepared to meet these ongoing obligations to avoid future delinquencies.

Regarding credit reporting, a successful reinstatement prevents the foreclosure from appearing on the homeowner’s credit report. However, any late payments that occurred prior to the reinstatement will generally remain on the credit report for up to seven years. While the reinstatement itself does not erase past missed payments, it prevents the more severe negative impact of a completed foreclosure.