It may take months of missed mortgage payments before a lender begins the foreclosure process. As reported by Bankrate.com, the average foreclosure took about 24 to 28 months based on data compiled from the fourth quarter of 2020.
Lenders do not usually begin the foreclosure process when the first missed payment occurs. The agreement a borrower signs when purchasing or refinancing a property details the amount of time a bank provides as a grace period. When making a payment before the grace period ends, a borrower typically avoids a foreclosure.
Borrowers may have options if they need more time to pay
By asking a lender to accept delayed mortgage payments for a short duration, a struggling borrower may ward off a foreclosure. When an individual anticipates that a severe financial problem could last several months, he or she may request forbearance from a lender. This could help postpone upcoming mortgage payments until the financial circumstances improve.
As noted by the Consumer Finance Protection Bureau, forbearance may last three months and extend to 18 months depending on the type of mortgage and the approval process. While pausing payments generally does not stop late fees or interest from accumulating, it may give a borrower time to catch up on unpaid bills. This approach may work when an individual experiences a temporary financial setback.
Bankruptcy may help resolve a long-term financial problem
Borrowers who have substantially lost their income, such as from unemployment or a medical condition, may experience long-term financial problems. By filing for bankruptcy, however, a homeowner may have an opportunity to avoid foreclosure and keep a home.
The type of petition required to maintain ownership of a property may depend on how much equity the home has at the time of the filing. Lenders may no longer have a right to foreclose once the bankruptcy process has started.