Racing Time: When the Bank Accelerates Your Mortgage

When you miss a mortgage payment time seems to accelerate. Before you know it another thirty days goes by. Now you owe two payments. By the time you’ve missed three payments, the bank “accelerates your mortgage loan.” Talk about stress! 

You know you need to do something about it. But did you also know that when the bank accelerates your mortgage, there are solutions that your bank can’t offer you? Before we talk about the 90-day mark — and the panic that comes when the bank accelerates your mortgage loan — let’s go back to month one. The first notification you’ll receive after your first payment is late will be via postal mail.

As soon as you’ve missed you second payment, the bank will probably call you. At this point, if you haven’t already, you absolutely must pick up the phone. If you miss three mortgage payments, expect to receive the mortgage acceleration letter. At this point, it may be still be possible for you and the bank to negotiate a dignified, fair and reasonable solution. The best thing you can do at any point before you receive a notice of an accelerated mortgage is to contact your bank. Here are three reasons to face the bank as soon as you’ve missed even a single payment.

  • Reaching out to your lender relieves stress and may pave the way to a solution. Being proactive gives you some control and peace-of-mind. If you can’t make your payment due to an unforeseen crisis, let the bank know why they should consider working with you. Whatever else is going on that’s causing you to miss your payments, avoiding your lenders will only add to your turmoil.
  • As soon as you know you’re running behind, calmly and honestly explain your situation. The bank may agree to an alternative, temporary adjustment.
  • In the best possible scenario, you may even be able to discuss a permanent loan modification, lowering your payments to a level that allows you to protect your credit and stay in your house.

After 90 days with neither a mortgage payment nor communication from the homeowner, the lender will request the loan due in full. This is called the “demand letter” or “notice of acceleration.” The bank gives you 30 days to pay of the full amount of the loan. The “acceleration period” begins in the third month after your last full payment and usually lasts 30 days…thirty of the most stress-filled days of your life. Now you’re probably thinking, “Who are they kidding?” When the bank accelerates your mortgage, you’re already behind three payments. You obviously can’t pay the loan in full. (Not unless you win the lottery!)

In fact, the thought of the bank expecting you to pay off your mortgage off may seem like some kind of cruel joke. At this point however, banks are very serious about resolving your loan – and it’s probably not going to be in your favor.

The good news is that even now, you can still do something about it. Alternatives do still exist… even if it feels like a desperate race against time. Don’t despair. As soon as you talk to someone about your situation, it’s like the lights coming back on after a blackout. Your situation may not seem as bleak as you imagined. If you are holding that acceleration letter in your hands right now, or if you think you may receive one soon, call your bank. Remember, the sooner the better.

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Photo Credit Flickr CC: Nick Wright

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