The good news is that the rate of new mortgage delinquencies has slowed. The bad news is that many Tennessee residents are still behind on their house payments.
Just over 7.5 percent of Americans were delinquent at the end of 2011, down from 10 percent in 2010. However, that still adds up to a lot of missed mortgage payments. In all, 12.63 percent - or one in every eight borrowers - is either delinquent or in danger of becoming delinquent.
In Tennessee, where foreclosures are expected to rise rapidly in the months following the massive bank settlement, it's likely that dropping real estate values could lead to additional late payments.
For many, making a late payment is the first step down a path that leads to serious financial distress - and in some cases, foreclosure.
As the New York Times recently pointed out, many borrowers who miss a payment because of an unexpected expense or income loss end up trapped in a cycle of growing penalties and fees that can make it nearly impossible to get back on track.
Understanding mortgage payment deadlines can be the difference between a one-time late payment - or the beginning of the end.
Mortgage payments are usually due on the first day of each month, but many lenders allow borrowers a 15-day grace period. Making a payment a few days late is risky, but if you can get organized so that it's a one-time occurrence, it probably won't have lasting results.
However, homeowners who are repeatedly late are more likely to get lazy and overshoot the grace period - and this is when you'll start to see serious consequences.
If your check arrives after the cut-off time on the 15th day of the month, you're going to be looking at a late fee of up to 5 percent, depending on your lender. If you're 20 days late, you now owe your original payment, a 5 percent fee, and, in just 10 days, the next month's payment. It doesn't take long for homeowners to get overwhelmed and fall behind for good.
Once it's been 30 days past your due date, your lender reports your delinquency to credit bureaus, which place the information on your credit report. Each late payment remains as a mark on your report for 7 years.
Additionally, your late payment wreaks havoc on your credit score. A single missed deadline can drop your number by 100 points, and your score will continue to drop as time goes by without payment.
Many people avoid seeking bankruptcy protection because they fear filing for Tennessee bankruptcy will wreck their credit score. However, bankruptcy is often the only solution for getting current on mortgage payments, which is necessary to stop credit damage.
The sooner you get back in the habit of making on-time payments, the sooner you can begin rebuilding your credit.
Once you pass the 120-day mark, the bank can begin foreclosure proceedings. However, homeowners should avoid getting anywhere close to this timeline.
Studies show that borrowers who can get their act together within 30 days have the best chance of recovery. Longer than that, and the fees and penalties pile up to the point that it's virtually impossible to catch up.
Whether you're in danger of missing your first mortgage payment or are already in line to lose your home to the bank, filing for Tennessee bankruptcy can stop foreclosure and provide a manageable way to pay down debt.
More Blog Entries:
Mortgages: Paying on Time, by Vickie Elmer, The New York Times