Struggling to Make Mortgage Payments? Here’s Some Expert Advice

Stay away from foreclosure by being proactive

Behind on mortgage payments? Struggling to make them? You’re not alone.

The compounding impact of inflation, combined with elevated taxes and insurance costs stresses many homeowners. In fact, foreclosure filings jumped 5% annually and 10% monthly in January, according to data provider Attom.

The good news is mortgage relief comes in many forms. See the steps you can take to help your financial profile and learn about delinquency, default, forbearance, and foreclosure from a professional mortgage servicer.

In this article (Skip to...)

• Advice for struggling homeowners
• Steps to take if you’re delinquent
• Is refinancing a good idea?
• What to do if you default?

Meet the expert

Toby Wells is a leader in the mortgage servicing industry with 30 years of experience in servicing, originations, capital markets, and asset management. He currently serves as president of Cornerstone Servicing, a leading mortgage servicer dedicated to helping home buyers be smart homeowners for life. Cornerstone Servicing is a division of Cornerstone Capital Bank, SSB.

Wells shared his thoughts on what borrowers should do if they’re behind on their mortgage and how to lower their payments in a Q&A with The Mortgage Reports. Answers have been edited for brevity and clarity.

What advice would you give borrowers struggling to make mortgage payments?

“The first thing someone needs to do is take a step back to ask and answer the question, why? Is it something that’s short-term and in your control? Out of your control is if you just lost your job. But in a lot of cases it is in your control and may be as simple as budgeting.

One of the things we find really invaluable is being able to talk to a mortgage counselor to help assess your financial wherewithal, know what you can afford, and making sure you’re budgeting properly. Beyond that, it would be reaching out to your loan servicer to see if there’s an opportunity to recast your mortgage¹. Generally, if you made over $10,000 in curtailments over time, you can recast.

Another option could be if you have a home-to-value ratio below 80%, you may be eligible for mortgage insurance removal. Or proactively filing for homeowner tax exemptions. Some customers believe that’s automatically done, but it requires the customer to reach out to the relative taxing authority and make those proper elections.

Others include insurance, which is unfortunately skyrocketing and a bit of a commodity to the extent a customer who has been with an existing insurance agent or company for a long period of time is likely paying more than they should be. So going out and actively shopping on an annual basis for your insurance is another way to ensure that you’re able to reduce your overall monthly payments.”

¹ Recasting is when you make a lump-sum payment toward your mortgage’s principal balance. You keep your interest rate and loan term, but your lender reamortizes the mortgage. Your monthly payment amount decreases with the new, lower principal.

What steps can you take if you’re delinquent on your mortgage?

“Let’s assume you’re managing within your budget and minimizing your homeowner expenses — like in the examples outlined above. When you talk about avoiding delinquency, a lot of times there’s hesitancy by borrowers to reach out to their loan servicers. But servers are truly here to help find a way to assist the borrower and keep them in their home.

The first thing you really need to do is communicate quickly. There’s going to be — or should be — a lot of outbound inquiries from your loan servicer. Even without that proactivity, the customer needs to reach out to their servicer early, often, and consistently to make them aware of the situation. That gets back to are the delinquent payments in my control?

Depending on what reserves you have available, you could be eligible for some type of forbearance. A forbearance is going to stop you from moving into default by postponing your payments for a short period of time — usually 3-to-6 months. Now, those postponed payments are still due and must be remedied at the end of that period.

If you have a government or a GSE loan, you’ll have many different options coming out of forbearance. A more common one is a deferral or partial claim. They simply take any delinquent payments and add them to the backend of the loan, so that’s a happy path. In some cases, the servicer will work through a modification with a payment reduction.

There could be some cases where even with the deferral or modification where you just can’t afford the home. Then you can work on selling the home, preserving the equity and preserving your credit, and either moving into a more affordable home or renting. We find today that a lot of homeowners have a decent chunk of equity and there really aren’t many good reasons why anyone should have to go through default and foreclosure.

Most customers we’re seeing are able to quickly move into forbearance, get back on their feet, and put them back at par with their mortgage. That’s why it’s super critical to call your servicer early to assess your financial condition as you either work through the short-term issue or evaluate the right longer-term option.”

Would refinancing be a good idea for delinquent borrowers?

“Refinancing over the last year certainly would have been difficult for most borrowers to see much of a benefit. Maybe it’ll be an option as we go into 2024 and see some interest rate reductions. There’s a certain amount of costs you need to cover to make sure that it makes sense to refinance.

Avoiding delinquency or default is really preserving your credit, doing everything you can to make your mortgage payment, so in the event that rates have dropped, etc, you’re in a position to refinance. Refinancing really isn’t an option for a consumer who hasn’t made their mortgage payments since they generally won’t be eligible.”

What should you do if you default on your mortgage?

“A lot of times, near-term delinquencies just occur because there’s a financial surprise. If you still can’t afford your payments after forbearance and you can’t anticipate that changing, then you should work with your servicer on selling the property.

Typically, there’s going to be sufficient equity in the home, so the borrower will have monies available. The faster the homeowner is able to [tap their equity], the more money they’re able to recoup and use to either purchase or rent a place they can afford. Delaying that decisioning process eats into equity and adds expense. Your servicer will help you find a realtor to work with and suggest pricing for your home.

If you don’t have sufficient equity, your servicer will work with you on a short sale — where the proceeds are not enough to cover the remaining mortgage. The servicer will go through all your loan documents, many of which are without recourse, to minimize any ongoing liabilities. That way, you can sell the home and move on. Have that discussion as early as you can so they can evaluate the situation and try to keep you in your home.

If a borrower waits too long, they jeopardize their ability to find an option to stay in the home. It’d be a mistake for any customer to get in that situation, there are too many options available. All they have to do is make a phone call. The servicer will provide guidance and lay out the forbearance, modifications, or deferrals that could be available.”

The bottom line

If you find yourself in financial straits and have trouble paying your mortgage, remember you have options.

Programs exist to help keep you in your home, it’s just a matter of knowing which ones are available to you and acting quickly.

If you need assistance or are curious if you can lower your monthly payment, reach out to your mortgage servicer and assess your best way forward.