Once you fall behind on your mortgage, the amount you’re behind is called the arrears.
We have discussed how you may have loan modification options available to you that let you stay in your home and resume making mortgage payments without having to pay your arrears all at once.
But sometimes homeowners would rather pay their arrears, get current on their mortgage loan and resume making their regular mortgage payments.
This is called reinstating your loan. Reinstating your loan means you pay the entire amount you’re behind (arrears) plus all related fees (such as interest and late fees) to bring your loan current. After you reinstate, your loan will appear as paid to date in the lender’s records and you will resume making your original mortgage payments.
If you have fallen behind on your mortgage payments and want to reinstate your loan, your first step is to determine whether the lender has initiated the foreclosure process.
Reinstating before the foreclosure process has started
If you’re not in the foreclosure process yet, you want to cure the default on the loan. You need to ask your lender to give you a reinstatement quote. This document can be issued 30 days in advance of your payment date. For example, on May 1 you can order a reinstatement quote good through June 1 so you know how much will be due in 30 days.
If you pay the amount listed on the reinstatement quote, the default will be cured and you can resume making regular mortgage payments. The lender will then be unable to start foreclosure.
Make sure you pay the full amount listed on the reinstatement quote. Simply adding up missed mortgage payments and sending that amount may not be the actual amount due. Based on the terms you signed in your original note, the lender may add late fees for missed payments. If you don’t pull a reinstatement quote and send only what you believe is owed, the lender may deem this a partial payment. They will likely keep the partial payment but refuse to show the loan as fully up to date. This could lead to foreclosure.
Don’t accept any verbal reinstatement payoff amount, whether on the phone or in person. Make the lender give you the quote in writing. Verbal reinstatement amounts may be inaccurate and they may change. They are also impossible to verify later. If you send payment based on a verbal quote, the lender could change their mind and you would have no way to prove what they originally told you.Reinstating after the foreclosure process has started
If you have fallen behind on your mortgage payments and want to pay your arrears but your loan has entered the foreclosure process, rather than talk to your lender, work with the Trustee. The Trustee is the party who issued your Notice of Trustee’s Sale (NOTS). Their contact information should be listed in the NOTS.
Once a lender starts foreclosure and hires a Trustee, the Trustee is in charge of the foreclosure. They are responsible for documenting and holding all reinstatement amounts and quotes.Things to know and things you should do:
- Legal fees paid to the Trustee by the lender may be added to your total reinstatement amount. So, if you decide to reinstate the loan you may see additional legal fees added to the total amount due.
- Make sure you receive your reinstatement quote directly from the Trustee, not the lender. At this point in the process, to ensure that you’re making a full payment, the Trustee is the only one who has that number.
- Make the request in writing. Include your name, loan number, and Trustee Sale number found on your NOTS. Write “Please send me a reinstatement quote good through (Date) at (my contact information).”
- Fax the request to the fax number provided on the NOTS and to your lender. Call the Trustee to make sure they received the fax and continue to follow up until they send you the quote.
- In the state of Washington, you’re allowed to reinstate your loan up to 11 days before your foreclosure sale date. If you believe reinstatement is the right move for you, make sure you request the quote and gather the funds so you can send payment before that 11-day mark.
- Ask your Trustee how they would like to receive payment. Most Trustees want a cashier's check made out to the Trustee but payment processes are different for each Trustee. Have this conversation with them before you make payment.
If you fully reinstate before the 11-day deadline, the Trustee will cancel the foreclosure of your home and withdraw from the case.
You will resume making monthly mortgage payments outlined in your original loan.
You have to track your foreclosure date to make sure the sale actually is canceled. Get written confirmation from the Trustee that they have canceled the sale.Are the fees attached to the reinstatement quotes negotiable?
Sometimes. It is important to review all late fees and attorney’s fees attached to the reinstatement quote. Some Trustees and Lenders will take advantage of a reinstatement situation by tacking on fees in excess of work performed. There is little regulation on these fees, so it is important to review the fees carefully.
If you see something that looks excessive, request a full accounting of each fee. The Trustee should be able to provide you a breakdown of how they arrived at the reported fees. Request a breakdown for excessive late fees sent by the lender to make sure they only reflect legal late fees for missed mortgage payments.Are there any exceptions to the 11-day requirement to reinstate?
If you believe that you may be able to reinstate your loan, but not before the 11-day deadline, reach out to the Trustee and tell them your situation.
If you can prove that you fully intend to reinstate and have the ability to do so, the Trustee or lender may provide you more time in order to reinstate the loan. Reinstatement is generally good for lenders. They want you to pay them back and get current. Many times, lenders agree to postpone foreclosure in order to allow you to reinstate, but you have to demonstrate your ability to reinstate in a persuasive way.
We recommend putting together a package including:
- A signed and dated letter stating that you intend to reinstate the loan
- Include how you plan to come up with the funds
- Give a date for when you’ll have the funds
- Ask for a foreclosure postponement of a certain time (e.g. 15 days, 30 days, etc.). Asking for a general, indefinite postponement likely won’t work.
- Do everything you can to indicate that you are serious about wanting to reinstate
- Proof of funding: Demonstrate how you will come up with the funds. For example, if the funds are in a retirement account, send the retirement fund statement showing that the money is there. If you are borrowing the money, have the people you’re borrowing from sign and notarize a letter stating that they will be lending you money. Include the amount borrowed and the source.
Fax the package to the lender and the Trustee. Call to make sure they received the fax. While you’re on the phone, find out who is looking at your request and see if you can email them directly. It is not enough to simply fax the package, you have to push both the lender and the Trustee to pay attention to your request.Is a partial payment ever acceptable?
It may be an option for you to offer a partial payment of the full reinstatement amount in order to get a postponement that will give you time to gather the full funds. Lenders may agree to take a portion of money in exchange for foreclosure postponement.
Be careful with this option. Unless you are absolutely, 100% certain you will be able to fully reinstate, you shouldn’t send money or you may lose it. Never send money without an agreement in writing that the lender will postpone in exchange for a lump sum received.
Because you’re in default, the lender will keep the money you paid regardless of whether you’re able to fully reinstate. Don’t do this unless you know will be able to come up with the rest of the money.Modification options instead of reinstatement
If you’re barely making it through the month in your current financial situation, reinstating the loan may not be the best solution for you. If the reasons why you defaulted are still part of your life, it may be better for you to pursue an alternative like a loan modification or a short sale so you can get to a more affordable housing situation.
Some homeowners think reinstatement is the only way to stay in their home. That’s not always true.
Don’t spend thousands of dollars to get current on a loan you may not be able to maintain. Call us to learn about all your options to tailor the best plan to fit your situation.
If you think you want to reinstate, keep it as your last option. After all, you can reinstate all the way up until 11 days before the foreclosure sale. Other options may allow you to stay in your home and avoid having to pay a large lump sum.
Keep in mind that this isn’t tailored legal advice. We would love to help you with your specific situation. Please call 1-888-379-9261 right now, or fill out this form for a free consultation with one of our attorneys.