Reverse Mortgage Assistance Pilot Program to stop accepting applications Nov. 30

Keep Your Home California will soon close its Reverse Mortgage Assistance Pilot Program, a program that helps senior homeowners with a reverse mortgage catch-up on past-due property-related expenses, such as property tax or homeowners’ insurance, in order to avoid possible foreclosures.

Applications for the free mortgage-assistance program must be received by 6 p.m. Thursday, November 30, 2017. Homeowners who have a reverse mortgage and are at-risk of foreclosure should contact their reverse mortgage servicer to apply or receive more information about the program. A complete list of reverse mortgage servicers who participate in the program and their contact information can be found on the website at the following link: http://keepyourhomecalifornia.org/reverse-mortgage-assistance-program/.

The reason behind the end of the Reverse Mortgage Assistance Pilot Program is rather simple – the funds allocated for the pilot program will run out by the end of November 2017. The program has helped approximately 700 households and issued more than $9 million in assistance.

Keep Your Home California allocated $10 million for the Reverse Mortgage Assistance Pilot Program. During the next few weeks, between homeowners approved and awaiting funding and applications that are submitted before the deadline, the program will exceed the $10 million limit.

Keep Your Home California launched the Reverse Mortgage Assistance Pilot Program in February 2015 as a way to help senior homeowners with a reverse mortgage dealing with a financial hardship, such as a reduction in household income, extraordinary medical expenses or even the loss of a spouse.

“It saved our lives,” Joanne H. says of the Reverse Mortgage Assistance Pilot Program.

Joanne, who lives in Central California, had to close her business and pursued a reverse mortgage to help pay off bills. But she and her husband got behind on their property-related expenses and faced the possibility of losing their home.

“The weight it took off … you just don’t know. We were going to lose our home,” she said

Low- to moderate-income homeowners can receive as much as $25,000 in assistance under the Reverse Mortgage Assistance Pilot Program. Homeowners must meet county-by-county income limits – from about $84,000 in rural counties to more than $160,000 in the Bay Area.

The mortgage servicer must also participate in the Reverse Mortgage Assistance Pilot Program. Fourteen servicers – including Champion, Financial Freedom, James B. Nutter and Sunwest – participate in the program.

Keep Your Home California’s four first-mortgage programs – Unemployment Mortgage Assistance, Principal Reduction, Mortgage Reinstatement Assistance and Transition Assistance – will continue to accept applications and issue funding after November 30, 2017.

While the Reverse Mortgage Assistance Pilot Program is the first of the five programs to end, Keep Your Home California is entering the final stretch of the program, and homeowners are encouraged to apply as soon as possible for the four remaining programs. Keep Your Home California has assisted more than 77,000 homeowners since February 2011, with about $1.9 billion issued.

Homeowners interested in learning more or applying for Keep Your Home California should call the counseling center at 888-954-KEEP (5337) and visit www.KeepYourHomeCalifornia.org or www.ConservaTuCasaCalifornia.org for Spanish speakers. The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays. Calls can be taken in virtually any language.

 

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Keep Your Home California’s $3 billion economic effect is helping homeowners, small-business owners, local government

From the smallest cities like Albany and Weed to the nation’s second-largest metropolitan area, Keep Your Home California has had a tremendous economic effect.

All Californians – from homeowners faced with a financial hardship to small-business owners and even state government – have benefited from the free mortgage-assistance program that has helped more than 76,500 homeowners since inception, according to an updated economic impact report that analyzed program funding data from 2010 through 2016.

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Keep Your Home California issued $1.5 billion in assistance to homeowners during that six-year period, preserving an estimated $3 billion in economic activity, according to The Economic Impact of Keep Your Home California: A Statewide and Regional Analysis report from Dr. Joseph C. Von Nessen of the University of South Carolina’s Darla Moore School of Business. In other words, for every $1 of assistance provided, $2 of economic activity was preserved.

Keep Your Home California was fully implemented in early 2011, at a time when many homeowners were dealing with foreclosures and almost all homeowners were faced with a significant drop in the value of their homes. When the program started, more than 2 million Californians were jobless, including hundreds of thousands of homeowners.

But the program has proven extremely effective in many ways, from assisting homeowners to protecting private- and public-sector revenues.

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“A strong and vibrant housing market is a critical component of any healthy economy,” Dr. Von Nessen said. “Housing is not only one of the largest sectors of the economy, but individuals who live in stable housing environments also experience many economic and social benefits.”

The state-managed program’s $3 billion economic impact includes preserving $1.4 billion in property value, saving 9,800 jobs and $536 million in labor income, and protecting $98.7 million in tax revenue.

How does the program help preserve, protect and save?

Well, for example, preserving property values also protects property tax revenue for local government agencies, from cities and counties to school districts, and the state as well. If housing values decline, assessed property values follow – and government revenue slides.

Another example: Keep Your Home California can cover jobless homeowners’ mortgage payments, help them catch up on missed payments or even lower principal – and often reduce the monthly payments. The assistance allows homeowners to pay for goods and services, from necessities like clothing and food to health and home insurance premiums (note that many out-of-work homeowners are required to pay for their own health insurance).

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Keep Your Home California has helped homeowners throughout the state, from large cities to small towns. In fact, midsize cities – Stockton, Fontana and Moreno Valley – cracked the top 15 for those most helped by the program.

Corona finished at No. 15, with an economic impact of $30.6 million – a nice figure for a city of 166,000 residents. That means every Corona resident benefited with $184 from Keep Your Home California, regardless of whether they were approved for the program or not.

Los Angeles has enjoyed an economic impact of $180 million from the program, the most in the state and twice as much as second-place San Diego at $90 million. Wherever you live in the state — from Calexico to Crescent City, Tiburon to Truckee – Keep Your Home California has helped your economy and homeowners.

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The program will continue to assist homeowners as long as funding remains available, but consumers are encouraged to apply as soon as possible since Keep Your Home California is entering its final stretch.

In order to apply for Keep Your Home California, homeowners must have a financial hardship, such as a job loss, cut in pay, divorce, death in the family or extraordinary medical expenses. In some cases, negative equity – also known as an underwater mortgage – or an unaffordable mortgage, or both, are considered a financial hardship under the Principal Reduction Program.

In addition to the financial hardship, homeowners must meet county-by-county income limits and their mortgage servicer – the company that collects the monthly payment – needs to participate in Keep Your Home California. More than 260 servicers, including Bank of America, Wells Fargo Bank and U.S. Bank, participate in the program.

Homeowners interested in learning more or applying for the program should call the counseling center at 888-954-KEEP (5337) or visit www.KeepYourHomeCalifornia.org or www.ConservaTuCasaCalifornia.org for Spanish speakers. The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays. Calls can be taken in virtually any language.


Major changes will help open the door for more homeowners to qualify for Keep Your Home California

 Keep Your Home California is always looking to improve its free mortgage-assistance program to better help homeowners, from folks dealing with an unaffordable mortgage payment to those looking for work.

Quite often it’s a minor change, a simple tweak that will affect few applicants and homeowners.

But sometimes, the changes deserve a bit more attention – including a blog post — and will help many homeowners, like those the program has recently implemented.

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The most notable changes are with the Unemployment Mortgage Assistance Program. Keep Your Home California’s most popular program covers the monthly mortgage payment for out-of-work homeowners eligible for unemployment benefits from the state Employment Development Department.

Keep Your Home California eliminated the $3,000 monthly mortgage payment limit connected to the Unemployment Mortgage Assistance Program. The program will now cover mortgage payments for qualifying homeowners – regardless of the amount – for as long as 18 months or a total of $54,000, whichever comes first.

For example, out-of-work homeowners with a $3,600 monthly mortgage payment could get up to 15 months of assistance from the Unemployment Mortgage Assistance Program.

The change will help homeowners with larger mortgage payments who previously would not have qualified and still ensures that all homeowners have the same amount of assistance (up to $54,000) available to them.

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A couple of other changes will also affect the Unemployment Mortgage Assistance Program. Homeowners can be eligible for the program if they received unemployment benefits from the EDD within the previous 60 days, double the current 30-day limit.

Even if a homeowner’s EDD benefits have already expired, as long as it was less than 60 days ago, they can still qualify for assistance. This change should give jobless homeowners more time to apply for the program, especially if their unemployment benefits are ending.

Other changes to Keep Your Home California:

  • Homeowners can now apply for and tap into the Mortgage Reinstatement Assistance Program multiple times, if necessary. The Mortgage Reinstatement Assistance Program helps homeowners catch-up on their past-due mortgage payments, up to a total of $54,000. For example, homeowners could get $5,000 to catch-up on their past-due payments, then later another $15,000 – but they cannot exceed a total of $54,000. However, homeowners must apply each time for the Mortgage Reinstatement Assistance Program and have a new hardship.
  • Severe negative equity under the Principal Reduction Program will decline to a loan-to-value ratio of 115% from the previous 120%. Again, this will allow more homeowners to be eligible and get much-needed help from the program.
  • Homeowners with interest-only loans are now eligible for assistance from the Principal Reduction Program. The monthly mortgage payment must be affordable, per program guidelines, once it converts to a fully amortized loan, in order for homeowners with interest-only loans to qualify. Previously, interest-only loans were ineligible for Principal Reduction program consideration.
  • Keep Your Home California has increased the current mortgage balance for the Reverse Mortgage Assistance Program, from $625,000 to $750,000. The program offers as much as $25,000 to help seniors who are behind on their property-related expenses, such as their property taxes or insurance.

All of the changes are designed to help more homeowners qualify for the mortgage-assistance program. However, before homeowners can apply for Keep Your Home California, they must meet the core requirements, including a financial hardship, such as a job loss, cut in pay, divorce, death in the family or extraordinary medical expenses.

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In addition to the financial hardship, homeowners must meet county-by-county income requirements and their mortgage servicer – the company that collects the monthly payment – needs to participate in Keep Your Home California.

Keep Your Home California has issued over $1.8 billion – or about 85% of the funding allocated for the program – to 76,000 households across the state.

Homeowners interested in learning more or applying for the program should call the counseling center at 888-954-KEEP (5337) or visit www.KeepYourHomeCalifornia.org or www.ConservaTuCasaCalifornia.org for Spanish speakers. The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays. Calls can be taken in virtually any language through a free translation service.

 


Homeowners can benefit from multiple programs with Keep Your Home California

Sometimes bad luck can hit more than once. A cut in pay, job loss, divorce, or extraordinary medical expenses from a serious health issue, can occasionally come in waves.

Just ask anyone who has lived more than a couple of decades. Life is indeed a comedy – and a tragedy.

And, when life’s challenges make for rough waters, Keep Your Home California wants to provide a safe harbor.

The free mortgage-assistance program was designed to help homeowners who are having difficulty paying their mortgages due to financial hardships – multiple times, if needed.

In fact, about one of every six homeowners approved for Keep Your Home California has used the federally funded program at least twice.

Now, homeowners must meet eligibility requirements each time they apply for the program – a financial hardship, county-by-county income limits and their mortgage servicer must participate in Keep Your Home California. They also cannot exceed a lifetime cap of $100,000 in financial assistance under the state-managed program.

But many homeowners approved for the program can apply for more help down the road.

The best – and the most common – example is out-of-work homeowners who can tap twice (or more) into the Unemployment Mortgage Assistance Program. The Unemployment Mortgage Assistance Program offers homeowners as much as 18 months or $54,000 in mortgage assistance, whichever comes first.

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When qualifying jobless homeowners are approved for the Unemployment Mortgage Assistance Program, their mortgage payments are covered while they look for work. Many homeowners may find another job in a matter of a few months, allowing them to leave the program with many months and thousands of dollars still available.

If they involuntarily lose their new job, the homeowner can reapply for Keep Your Home California and the Unemployment Mortgage Assistance Program. About 7,000, or almost 10%, of homeowners approved for Keep Your Home California have received assistance from the unemployment program at least twice.

Homeowners can also apply for assistance from other programs, though not at the same time. For example, let’s say the out-of-work homeowner had a monthly mortgage payment of $2,500 and used the Unemployment Mortgage Assistance Program for six months – or a total of $15,000.

If the homeowner has a new job, but his pay dropped with the new position, he may be able to apply for the Principal Reduction Program, which offers up to $100,000 in mortgage assistance. The program cuts the outstanding principal balance, which often results in the monthly mortgage payments going down, to establish an affordable mortgage for the homeowner.

Under the scenario, the homeowner could receive as much as $85,000 from the Principal Reduction Program (remember they already benefited with $15,000 from the Unemployment Mortgage Assistance Program). The maximum amount each homeowner could receive from Keep Your Home California is $100,000.

Of course, homeowners can combine other programs, including the Mortgage Reinstatement Assistance Program, which offers as much as $54,000 to help homeowners catch-up on their past-due mortgage payments. Whether or not a homeowner will ultimately qualify for more than one Keep Your Home California will depend on the homeowner’s circumstances, particularly, whether they have suffered a subsequent financial hardship that has affected their ability to pay their mortgage.

Before homeowners can apply for Keep Your Home California, they must meet eligibility requirements, including a financial hardship, such as a job loss, cut in pay, divorce, death in the family or extraordinary medical expenses.

In addition, homeowners must meet county-by-county income requirements and their mortgage servicer – the company that collects the monthly payment – needs to participate in Keep Your Home California.

Homeowners interested in learning more or applying for the program should call the counseling center at 888-954-KEEP (5337) or visit www.KeepYourHomeCalifornia.org or www.ConservaTuCasaCalifornia.org for Spanish speakers. The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays. Calls can be taken in virtually any language through a free translation service.

 


Even during best of times, many Californians continue to struggle

California is enjoying a booming housing market, with record-setting prices in some areas, including the Bay Area and parts of the Los Angeles region.

But while some homeowners are cheering fast-rising prices and multiple offers in a red-hot market, there are less-fortunate individuals who are doing whatever they can to keep their home.

Luckily, Keep Your Home California – a free mortgage-assistance program – is available for many of these homeowners. So far, more than 74,000 homeowners have been helped, and thousands more could benefit from the federally funded, state-managed program.

The $2.36 billion program assists homeowners with a number of hardships, from being out of work to having an underwater mortgage – and many other reasons. In short, even with a healthy housing market in some areas, many Californians are still struggling.

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Some housing markets – especially in the Central Valley, High Desert and Northern California – have been slower to recover. For example, 98% of homes in San Francisco have exceeded their previous peak price, generating hefty gains for homeowners.

But less than 4% of the homes in Bakersfield, Fresno and the Inland Empire (Riverside and San Bernardino counties) have passed their peak price, meaning many homeowners have underwater mortgages, according to a Trulia report.

In fact, almost 281,500 homeowners in California had negative equity during the first quarter and owe more than the current value of their home, according to a recent CoreLogic report.

Negative equity is not the end of the world for some homeowners. Yet “continuing to make monthly payments on an underwater home is like renting, but with the interest mortgage deduction,” says Greg Cook, a mortgage consultant in Southern California.

Basically, homeowners dealing with negative equity are not gaining and likely losing financial ground.

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Another all-too common challenge for homeowners is an unaffordable mortgage. A cut in pay or an increasing interest rate (or both) can make a one-time affordable payment into a much-tougher monthly burden. If a homeowner gets behind on just a couple mortgage payments, good luck catching up.

Of course, as we all know, sometimes life-changing events happen, such as a job loss, divorce, a death in the family or extraordinary medical expenses. These are all emotional – and financial – nightmares. And even during the best of economic times, all of these challenges happen far too often.

For example, California has created about 2.49 million jobs during the past seven years, easily the best job-growth rate in the nation, according to the state Employment Development Department. It’s the equivalent of everyone in San Diego and San Jose, the second- and third-largest cities in the state.

But even with the head-turning, impressive job growth, there are still 923,000 out-of-work Californians – more than the population of San Francisco, the fourth-largest city in the state. And there are some industries, such as energy and retail, where jobs continue to disappear. For example, numerous retailers — including Macy’s JCPenney, Kmart, Sears, Staples and Bebe — have announced store closures and layoffs during the past few months.

Plus, there are some areas of the state where the economic recovery is very slow. There are eight counties with jobless rates more than double the statewide average, including four counties with double-digit rates – Colusa, Imperial Merced and Plumas.

So, as some communities thrive – impressive job growth and home price increases – others struggle to survive. But it’s not always about a particular community or a region.

Sometimes, a booming economy and housing market can have a negative effect on seniors living on a fixed income. Higher home prices often lead to higher property taxes. For a senior on a tight budget, higher property taxes can become a financial hardship.

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“It caused a little disruption,” says Shirley Y. of the boost in property taxes prompted by fast-rising home prices in her Bay Area neighborhood that has become popular with homebuyers. “We were able to do it for a while … We just kept getting squeezed.”

It’s an all-too common situation for homeowners with reverse mortgages – and many others in the state.

Fortunately, Keep Your Home California can help Shirley. And with five programs, the free mortgage-assistance program can help many other homeowners with the challenges and hardships outlined above.

Homeowners just need to take the first step and contact Keep Your Home California.

In order to apply, homeowners must have a financial hardship, such as a job loss, cut in pay, divorce, death in the family or extraordinary medical expenses.

In addition to the financial hardship, homeowners must meet county-by-county income requirements and their mortgage servicer – the company that collects the monthly payment – needs to participate in Keep Your Home California.

Homeowners interested in learning more or applying for the program should call the counseling center at 888-954-KEEP (5337) or visit www.KeepYourHomeCalifornia.org or www.ConservaTuCasaCalifornia.org for Spanish speakers. The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays. Calls can be taken in virtually any language through a free translation service.

 

 

 

 


Celebrating Homeownership Month by helping homeowners

Homeownership is the foundation for today, tomorrow and the future.

Just ask homeowners in California, who enjoy their own piece of the American dream – in Golden State style. Backyard barbecues, binge-watching on the couch, cooking gourmet meals in the kitchen or planting flowers and veggies in the garden are just some of the fun of homeownership.

But homeownership is much more than burgers on the grill or bulbs in the ground.

June is National Homeownership Month, when federal and state agencies, lenders and real estate agents educate and encourage home-shoppers to become homeowners. Homeownership is critical for building strong communities (property tax is the largest revenue source for the State of California), creating jobs, energizing the economy – and is often a good investment for homeowners over time.

More than 1.1 million foreclosures past decade in California

Keep Your Home California has helped more than 73,000 homeowners stay in their homes, avoid foreclosure, escape negative equity, and get back on their financial feet. The free mortgage-assistance program has allowed these families to continue enjoying the benefits of homeownership.

If these families would have lost their homes, it would have been devastating financially and emotionally. For most of these homeowners, it would take several years before they would have been eligible for a mortgage, if they could even come up with the necessary down payment, which has become increasingly difficult as home prices increase in the state.

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Currently, only one of three families can afford the median-priced home in California, compared to almost 50% in first-quarter 2012. The dramatic decline has taken place in less than five years, according to the California Association of Realtors (CAR).

Being forced to move from a home – either from a foreclosure, deed-in-lieu of foreclosure or short sale – has an emotional effect on homeowners and their families, especially if their children are attending local schools.

More than 1.1 million California homeowners – or the equivalent of everyone in San Jose, the third-largest city in the state –lost their homes during the foreclosure crisis of 2006-2016, according to CoreLogic. In fact, California had 193,000 foreclosed properties in October 2009, or more in that month than 40 other states for the entire past decade.

Homeownership is often a good long-term investment in Golden State

Despite the dark days of the past, many Californians embrace and enjoy homeownership, while many renters dream about becoming homeowners.

“After all we’ve been through, homeownership remains an American value and the cornerstone of our economy,” said U.S. Housing and Urban Development Secretary Ben Carson in a news release on National Homeownership Month. “Today, we recognize the abiding value of owning a home and rededicate ourselves toward ensuring that every hardworking and credit-worthy American enjoys a fair chance at becoming a homeowner.”

Of course, becoming a homeowner is not easy for most Californians, but it’s often a good investment. Fortunately, there are programs available to help potential homebuyers, such as the loan programs offered by the California Housing Finance Agency.

The state’s current median-home price is almost $537,000, the highest level since August 2007. That’s more than double the price in less than eight years.

California Home Prices 1976-2016

The state’s median home price has increased 18 of the past 20 years, though the drops were dramatic at 38% in 2008 and 21% in 2009, thanks to the Great Recession. And there have only been nine down years since 1969, with only two years of price drops of more than 5% (yep, 2008 and 2009).

Hardships hurt everyone, from neighborhoods to state budget

California homeownership, as you can see, has been a good investment. As such, it is important to help existing homeowners remain in their homes to protect that investment – especially in California’s still recovering economy.

Many homeowners were affected by the Great Recession and some areas are still struggling, especially in the Central Valley, High Desert and Northern California. Less than 4% of the homes in Bakersfield, Fresno and the Inland Empire (Riverside and San Bernardino counties) have passed their peak price, meaning many homeowners have underwater mortgages, according to a Trulia report.

And almost 281,500 homeowners in California had negative equity during the first quarter of 2017 and owe more than the current value of their home, according to a new CoreLogic report.

Some of these homeowners are dealing with a hardship – such as a job loss, cut in pay, divorce, death in the family, extraordinary medical expenses or even an unaffordable or underwater mortgage (or both) – and could apply for Keep Your Home California.

The federally funded, state-managed program helps homeowners with what is often their largest investment, ensures stability for their families and neighborhoods, and even protects funding for local governments and the state.

A recent economic impact report found that Keep Your Home California preserved $2.5 billion in economic activity statewide, from property and sales-tax revenue to jobs. Basically, for every dollar the federally funded program issued, $2 of economic activity was preserved.

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Keep Your Home California is committed to helping low- to moderate-income homeowners to remain in their homes. Homeowners must have a financial hardship, such as a job loss, cut in pay, divorce, death in the family or extraordinary medical expenses in order to qualify for assistance.

In addition to the financial hardship, homeowners must meet county-by-county income requirements and their mortgage servicer – the company that collects the monthly payment – needs to participate in Keep Your Home California.

Homeowners interested in learning more or applying for the program should call the counseling center at 888-954-KEEP (5337) or visit www.KeepYourHomeCalifornia.org or www.ConservaTuCasaCalifornia.org for Spanish speakers. The counseling center is open 7 a.m. to 7 p.m. weekdays and 9 a.m. to 3 p.m. Saturdays. Calls can be taken in virtually any language through a free translation service.


I Fell Behind on My Mortgage: How Will This Hurt My Credit?

Editor’s note: Beth Kotz with Credit.com has provided a special blog to explain the effects mortgage delinquency and loss mitigation have on credit.

By Beth Kotz

As a homeowner, your mortgage and your credit rating are inextricably linked. To make sure you maintain solid credit, the best thing you can do is make your mortgage payments on time each month.

Mortgages have a major impact on your credit rating and even have their own category on a credit report.

So if you’ve hit some financial bumps in the road and are unable to make your next payment, be aware that falling behind does have consequences. While one isolated incident won’t set you back too far, if you’re unable to pay for longer you should know how this will impact your credit and what impact loss mitigation options can have on your rating as well.

Delinquent Mortgage Payments and Your Credit

Mortgage contracts typically include a grace period. If you make a payment just a few days after the due date, it will likely fall within this period. The lender still counts the payment as being on time, so there is no negative effect on your credit. Grace periods are usually 10 to 15 days.

If you miss the due date and the grace period, a mortgage payment will be considered late. According to  Sarah Davies, Sr. VP, Analytics, Product Management and Research with VantageScore, “Becoming 30 days delinquent on a mortgage loan can cause even a high credit quality consumers’ credit score to decline by as many as 100 points.”

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Your lender will report the delinquency to credit reporting agencies. It will appear on your credit report as a “Late 30” note. If you make the payment within 30 days, this note will go away after the next reporting period, and will not cause lasting damage to your credit score.

When mortgage payments are more than 30 days late, however, or when a consumer is repeatedly late making payments, the adverse effects on credit are more serious. Paying your mortgage 90 days late or more will damage your credit score for up to seven years.

If you fall more than 120 days behind on your mortgage, the lender normally considers you in default. You will receive a “Notice of Default” (NOD). A NOD is the first formal action a lender takes in a process leading to foreclosure. Because a NOD is a public document, it will be noted on your credit record and can also cost you in the form of late fees and higher interest rates. However, it is not as damaging as a foreclosure.

When a consumer falls too far behind, the lender can foreclose on the home. If you lose your home to foreclosure, or if you give it back to the lender via a deed in lieu of foreclosure, your credit score will drop by approximately 250 to 280 points. Restoring your credit score to a place where you will be able to secure a new mortgage with a lower interest rate and better terms will take about three years of on-time, consistent payments.

However, foreclosure proceedings typically take months or years and you can still try to work out an arrangement with the lender. If you take the initiative to stay in touch and find an option that will work, most lenders will work with you.

Loss Mitigation and Your Credit

Loss mitigation is a “catch-all” term that refers to any option that will help a homeowner who is behind on a mortgage to get caught up. There are several such options, and they have varying effects on credit.

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If you realize you are faced with a financial problem such as job loss or unexpected medical bills, you can ask your lender for a forbearance. You may need to act immediately as lenders may not grant a forbearance if you are already seriously delinquent on your mortgage. Under a forbearance agreement, you make smaller payments or no payments at all for a period of time. After you resume regular payments, you will also need to make up the payment amount that was skipped during the forbearance. The good news is that a forbearance will not negatively affect your credit.

Another option you may have is a loan modification. Essentially, loan modifications are permanently restructured mortgage contracts. The key feature of a loan modification is that it requires the lender to list the debt as current or paid in full with credit reporting agencies as long as you comply with the loan modification requirements. You should beware loan modifications that don’t present rigorous qualification guidelines as they can actually be debt settlement arrangements – which will hurt your credit.

Loan modifications endorsed by the U.S. government – like the Home Affordable Modification Program (HAMP) – will not impact your credit. If you continue to meet the requirements of the loan modification program, the mortgage will continue to be reported as current and paid in full. Government assistance benefits are not reported to credit bureaus. As such, applying with Keep Your Home California will not affect your credit score.

If you’ve fallen behind on your mortgage, remember that the situation isn’t hopeless. The worst thing you can do is ignore the problem and wait for it to disappear. Be proactive, educate yourself about loss mitigation assistance and contact your lender right away. If you live in California, a great first step is to contact Keep Your Home California to see whether you might qualify for assistance.

Remember, the bank or other mortgage provider does not want your home. Foreclosure is an expensive last resort for the lender. If you take the initiative to keep in touch and do your best to work out an agreement that will bring your account up to date, it will minimize any harm to your credit.

559520_1767301903269_1946830701_n (1)Beth Kotz is a contributing writer to Credit.com. She specializes in covering financial advice for female entrepreneurs, college students and recent graduates. She earned a BA in Communications and Media from DePaul University in Chicago, Illinois, where she continues to live and work.