Sellers in Panic Mode. How To Respond If You Are Already Behind

Sellers in Panic Mode: What To Do If You’re Already Behind on Your Mortgage

Quick Take: 3–Step Action Plan

• Get the facts today

• Pick a direction within 7 days

• Execute without delay this week

Step 1: Get the Facts Today

• Log in to your servicer portal
• Past‑due amount and due date
• Late fees, escrow changes, and any force‑placed insurance
• Loss mitigation status: not started, in review, approved, or denied

• Check your legal status
• Pre‑NOD (pre‑foreclosure but no public notice yet)
• NOD/NOS recorded (Notice of Default or Notice of Sale)
• Sale date scheduled and how many days away

• Gather documents (label clearly; one PDF if possible)
• Last 2 months of pay stubs or profit‑and‑loss (if self‑employed)
• Last 2 months bank statements for all accounts
• Most recent mortgage statement and escrow analysis
• Homeowners insurance declarations page
• Last 2 years W‑2/1099 and tax returns
• Hardship letter: brief facts, dates, cause, resolution path

Step 2: Pick a Direction Within 7 Days

• Reinstate if cash is coming soon
• Best when the hardship is over and you can pay all arrears plus fees in one shot
• Goal: get a written reinstatement quote and wire by the deadline

• Repayment plan if income is steady again
• Spread the missed amount over 3–12 months on top of your normal payment
• Watch affordability: plan payment should be ≤ 35% of take‑home pay

• Loan modification if current terms aren’t sustainable
• Aim to reduce payment via rate, term, and/or capitalization of arrears
• Provide full, clean package; partials stall your review

• Forbearance or short‑term deferral when hardship is temporary
• Pauses or reduces payments for a set period, then resumes or rolls into a plan

• Sell quickly if affordability won’t recover before dates compress
• Choose a pricing and contract strategy that maximizes certainty and net
• Explore standard sale and, if needed, short sale if you owe more than value

Step 3: Execute Without Delay This Week

• Submit one complete, labeled package to loss mitigation
• Upload in the portal and confirm receipt by phone; ask for a case number
• Keep a call log: date, time, rep name, and summary

• If selling, optimize for attention and certainty
• Price to the market you have, not the market you wish you had
• Seek strong terms: short inspection, verified funds, appraisal gap plan
• Choose a credible buyer and a clean, complete offer package
• Line up a backup offer if days-on-market are rising

• Track every deadline
• NOD/NOS and sale dates, document expiry dates, and appeal windows
• Ask for any postponement, plan, or approval in writing and save PDFs

Exact Scripts for Your Servicer Call

• Opening: “Hi, I’m calling about loss mitigation. My loan number is [####]. I’m behind due to [brief hardship]. I have a complete package ready. Can you confirm the documents you need and my current status?”

• Status check: “Can you read me the last note on my file? What is my milestone and estimated review completion date?”

• Reinstatement quote: “Please generate a reinstatement quote with a good‑through date and wiring instructions. Can you upload it to the portal today?”

• Escalation: “If the file is time‑sensitive, what is the escalation path? May I speak with a supervisor or relationship manager?”

Decision Matrix: Keep vs. Modify vs. Sell

• Keep (reinstate/repay) if
• Arrears < 2 months of income and hardship has ended
• Payment to income ≤ 35% after plan

• Modify if
• Income is stable but current terms are unsustainable
• You can document hardship and affordability at the target payment

• Sell if
• You cannot afford a realistic plan or mod payment in 30–45 days
• Equity exists or a short sale approval is likely

Timeline Basics and State Nuances (High Level)

• Non‑judicial states (e.g., CA, NV, AZ): timelines can compress quickly once NOD/NOS is recorded; postponements are common but never guaranteed

• Judicial states (e.g., FL, NY, IL): longer legal process but strict hearing dates; engage early with counsel

• Federal programs: VA, FHA, and GSEs have specific waterfalls and documentation standards; match your package to the program

This is general guidance, not legal advice. Consult a housing counselor or attorney for your state specifics.

Seller Playbook: Getting to the Finish Line

• Pricing: aim for the first 10 showings in 7 days; price for offers, then negotiate for net

• Presentation: clean, safe, functional; fix small items that spook underwriting

• Terms: fewer contingencies trump slightly higher price when time is tight

• Communication: keep your agent and servicer aligned on dates and milestones

FAQs

• Will contacting my servicer add fees or accelerate foreclosure?
• Generally no; complete reviews often pause the worst outcomes. Always get status notes and dates in writing.

• Can I list and still pursue a loan modification?
• Often yes. Keep your agent and servicer aligned and disclose any offers.

• What if I’m upside down?
• Ask about short sale options and deficiency waivers. Get approvals in writing before buyer contingencies are removed.

• Can I stop a sale date once it’s posted?
• Sometimes. A complete loss mit package or a verified sale contract can lead to a postponement, but it’s never guaranteed. Move fast and get any postponement in writing.

• Will a loan modification hurt my credit?
• The review itself usually doesn’t, but late payments already impact credit. A successful mod that lowers delinquency going forward typically helps over time.

• Should I keep paying other debts?
• Prioritize housing, insurance, and essential utilities. If cash is tight, call other creditors and ask for hardship plans to preserve funds for your housing outcome.

• Do I need an attorney?
• Not always, but if you’re in a judicial state, have a sale date scheduled, or received legal notices you don’t understand, consult a housing counselor or attorney.

• How fast can I sell?
• With pricing for attention and a clean offer, many homes can go under contract in 7–14 days. Plan your move‑out timeline with your agent early.

• What if my hardship is ongoing?
• Ask about forbearance or a temporary payment reduction, then reassess for a mod or sale before dates compress.