If you’re behind on mortgage payments, chances are – you’re hearing bits of information about lots of different options available to you.
One option to get current on your mortgage is to complete a mortgage reinstatement.
What is a mortgage reinstatement?
A mortgage reinstatement occurs when you pay back all the mortgage payments you missed (including any late fees or foreclosure-related fees).
Once you reinstate your mortgage, your mortgage lender “brings the account current.” You are no longer behind on mortgage payments and you just resume making your regular mortgage payments each month.
Any foreclosure activity that was attached to your account gets canceled once the reinstatement process is complete.
Can I reinstate my mortgage even if I have a foreclosure auction date in place?
Probably, yes. Different states have different laws about how close to a foreclosure auction date you can reinstate your mortgage.
In Washington, you can reinstate your mortgage up to 11-days before the foreclosure auction date.
What is a reinstatement quote?
A reinstatement quote is the document that tells you the total amount needed to reinstate your mortgage. You should have a reinstatement quote in writing before you send any money to the bank.
Do not rely on any verbal reinstatement number given to you by a bank representative.
The reinstatement quote will tell you:
- The FULL amount you owe to reinstate the loan
- The name of the Trustee or Foreclosure Attorney’s office handling the reinstatement
- The breakdown of the full amount including your arrears, months missed, foreclosure fees added and late fees added
- Payment instructions with detailed information about how the bank wants you to make your payment
- The date that the reinstatement quote expires
Pay close attention to the expiration date and the payment instructions as they often direct payment to go to your foreclosure trustee (the in-state party handling your foreclosure) instead of to the lender directly.
Why is there a foreclosure trustee involved in issuing my reinstatement quote?
In states that execute non-judicial foreclosures, your bank will hire a foreclosure trustee to handle your foreclosure.
The Trustee will likely be a law firm or a company responsible for making sure that the foreclosure happens in accordance with your state’s laws.
Trustees are often responsible for preparing the reinstatement quotes and handling the reinstatement funds.
What if I can’t afford to reinstate my mortgage?
Many people who have experienced financial hardship cannot afford to reinstate their mortgage.
There are many other options that you can apply for with your mortgage lender to avoid foreclosure.
- Loan Modification: A loan modification is a new loan with new terms that allows you to resume mortgage payments without having to pay everything you owe all at once. Usually, your missed mortgage payments get added to your total principal balance and become due at the maturity date of the loan. It is common for loan modifications to offer reductions in interest rates, extended maturity dates, and sometimes – they lower the monthly mortgage payments.
- Repayment Plan: A repayment plan is an agreement that allows you to resume your regular mortgage payment and pay an extra amount on top of your mortgage payment until you’ve paid back all your missed payments. Once you have paid everything back, you continue making your regular monthly mortgage payment.
- Forbearance: A forbearance gives you a temporary break in having to pay your mortgage. Once approved for a forbearance, you are allowed to stop payments for the approved months without the lender taking foreclosure action against you.
- COVID-19 Deferral Agreement: For those of you who were placed on a COVID-19 Forbearance plan (and have Fannie Mae or Freddie Mac as your investor), you may be able to receive a deferral agreement which takes the amount of payments you missed during your forbearance and defers the amount owed to the maturity date of your loan so you can just resume your regular payment.
- Partial Claim COVID Transition Option: For those of you who were placed on a COVID-19 Forbearance plan (and have FHA as your investor), you may be able to receive a partial claim agreement which takes the amount of payments you missed during your forbearance and defers the amount owed to the maturity date of your loan so you can just resume your regular payment.
- Short Sale: A short sale allows you to sell an underwater property for less than what is owed on the mortgage. Your mortgage lender approves the sale and then typically waives the deficiency balance (the remaining amount owed) so you can sell your home and move on without owing the remaining balance.
- Deed in Lieu of Foreclosure: A deed in lieu of foreclosure is an agreement between yourself and your mortgage lender where you sign a document giving the house back to the bank in exchange for the bank agreeing not to foreclose on you.
Don’t just assume that you know how much is needed to reinstate your mortgage
There could be fees added that you don’t know about until you see your reinstatement quote.
If you send a reinstatement amount of money to your lender based on just your calculations, they could consider this a partial payment, reject the payment and still move forward with foreclosure.
Don’t rely on any verbal numbers given by your lender – always have a reinstatement quote in writing before you send funds.
Don’t reinstate if you truly can’t afford future mortgage payments
If you can gather enough money to reinstate the mortgage but you know you can’t afford any future mortgage payments, you’re better off looking at other loss mitigation options and saving the lump sum reinstatement amount so you don’t end up right back in default again.
Sample Reinstatement Quote Request
__________________________ (The borrower’s name as shown on your mortgage)
__________________________ (Full property address as listed on your mortgage statement)
__________________________ (Your loan number, taken from your mortgage statement)
To: _________________________(Your lender’s name)
Please send a reinstatement quote on the above-referenced loan good for 30-days to:
____________________________________________________(put an email address, fax number or mailing address for you – this is where the bank will mail the quote to).
Borrower’s Signature (use a wet signature with a pen, not electronic signature)
Co-Borrower’s Signature (if applicable)
Mortgage Relief Options for Washington Homeowners
Mortgage issues are complex. Banks and mortgage servicers can be very uncooperative. If you think you might need some help, you have some good options.
Here are three articles to help you understand the help that is available to you.
What Can a Mortgage Attorney Do For You
What to Look For In a Loan Modification Attorney
What Can a Foreclosure Attorney Do For You
If you’re a homeowner in Washington state looking for more information about reinstatement, feel free to give me a call at (425) 654-1674.