Two methods to halt a foreclosure include reinstatement and payoff. Reinstatement requires a one-time payment to bring the loan current. On the other hand, payoff means remitting the complete outstanding loan balance to the lender. (Payoff prior to a foreclosure sale is typically called redemption, an equitable entitlement accessible in all states.)
You can inquire with your mortgage servicer about the sum needed for either reinstatement or payoff. If they don’t reply, this could provide a defense in a future foreclosure. If you’re not the loan’s borrower, you’ll require written permission from the borrower to acquire the figure. For either reinstatement or payoff, ensure you submit the exact amount due. If not, the lender might decline it and proceed with the foreclosure sale. The lender’s lawyer or the foreclosure trustee could verify the figure with you beforehand to prevent misunderstandings.
Reinstatement
As noted, a homeowner can reinstate a loan by repaying any delinquent payments, along with expenses tied to the delinquency. They will still need to maintain their monthly payments following reinstatement, or risk defaulting once more. Elements that could factor into a reinstatement, beyond the skipped payments, include late charges, legal fees, foreclosure process costs, property inspection expenses, and a fee to record the cancellation of the foreclosure sale.
Beneficial for Both Parties
Even if state statutes or the mortgage do not grant a homeowner the right to reinstate, the lender might consent anyway since it’s frequently simpler to handle than foreclosure.
You should attempt to reinstate the loan promptly. Making payment at the final moment exposes you to risks from issues with a delivery service or bank, potentially allowing the foreclosure to proceed. State statutes might set a reinstatement cutoff, or your mortgage or deed of trust could specify one. Reinstatement isn’t guaranteed unless mandated by state law or mortgage provisions, but you might still achieve it even if the lender isn’t obligated to permit it. The lender may view continuing the loan as less troublesome than finishing the foreclosure.
Payoff
Settling the loan will require not just clearing the full remaining balance but also covering expenses akin to those in reinstatement. Therefore, the balance shown on your monthly statement isn’t the complete payoff amount, as it excludes those added costs. Like with loan reinstatement, you should strive to pay off the loan early to avoid disruptions from logistical problems.
You ought to request a payoff statement at least five business days prior to the payment. Federal regulations mandate that mortgage servicers supply a payoff statement within seven days of your request, except in specific situations. One exception is if the loan is in foreclosure, where the servicer must respond in a reasonable period. This is yet another incentive to begin the process quickly.
Keep Records to Defend Against Foreclosure
Submit a reinstatement or payoff quote request in writing and retain a copy if the mortgage servicer misses the legal response deadline. This could serve as a strong defense to foreclosure. For more on servicer issues, see Errors and Abuses by Mortgage Servicers & Your Legal Rights.
Challenging the Amount of a Reinstatement or Payoff
You possess the entitlement to question what you consider an inaccurate figure in a reinstatement or payoff statement. This involves sending an error notice to the mortgage servicer. Per federal law, it has seven business days to fix an error concerning the payoff balance. Contesting the amount doesn’t halt a foreclosure automatically, so consider carefully before postponing payment over a minor disagreement. For broader entitlements, read Homeowners’ Legal Rights Before, During, and After Foreclosure. For alternative approaches, check Understanding Lender Criteria for Modifications and Exploring Foreclosure Remedies in Depth.