What happens when I stop paying the mortgage payments ?

Question

What happens when I stop paying the mortgage payment on multiple properties? I do not have a choice at this time. I have a number of rentals and my cash flow is very good but I overextended myself, and my cash reserves are too tight.  I've already stopped cash bleeding in all areas of my business over the past 45 days and I am freezing all improvement projects and released some existing staff.  So the question is what happens when I stop paying the mortgage payment for 60 to 90 days? I will be in a much better financial position if I choose to do this after the 60to 90 day period.  I'm aware this will hurt my credit for a long time and I am willing to live with that. I would prefer to do this, then sell the property since all my properties are cash flowing well.

Will I

-just be able to resume normal payments after the 60 to 90 day period?

-will I be able to keep my interest rates?

-Will they make me pay the backpay amount?

-is there any possibility of getting a six month forbearance?

-be able to keep my existing interest interest rate they are quite good?

Note:

-the properties are located in California, Nevada, Arizona, and Connecticut

-the properties are all financed under conventional loans

-most of the loans are purchased as rentals, two are purchased as primaries.

Benjamin Aaker · Answer

Don't stop making your payments. Change your mindset from that of a victim to that of the investor and look for the solution. It is not worth it to get the reputation of taking loans and not paying them back.

1. Take Theresa's excellent advice and talk to your bank. Bankers will often work with you.

2. Sell one or more properties. Take a loss if you must. If the properties are cash flowing well, then you haven't really told us why you are in this predicament.

3. Get to the bottom of your predicament and remedy that. If you can't, then see #2.

4. Get yourself a W2 job and work evenings and weekends. No job is too menial to get this situation straight.

Chris Seveney · Answer

Do not ignore your banks calls. As if they start the legal process the fees will go up significantly and you will continue to get further behind. To answer your specific questions:

1. Typically No but depends on the bank. They may only accept full reinstatement of the loan. You will need to talk to them about forbearance or other options.

2. If they allow you to keep paying, you will be able to keep your interest rate.

3.Will they make me pay the backpay amount? Yes, but you may be able to get a forbearance.

4.Is there any possibility of getting a six month forbearance? Possibly but if they are not owner occupied homes chances are far far less.

You really need to be honest with yourself and if you think 3 months of non payment will solve the problem, look in the mirror on why you got in trouble. If the properties are cash flowing then you are blowing that money elsewhere and if you do not change your habits you will be back in the same spot. If you are foreclosed upon your odds of getting a loan in the next five years goes to near zero.

My recommendation - sell the assets and get your finances back in order.

Theresa Harris · Answer

I'd talk to your bank before you stop paying and see what they suggest.  Go to them with a plan (eg you are planning on selling some properties).  Prioritize the properties as you will still pay some of the mortgages.  Can you get a line of credit to use to give you the cushion you need and still pay the mortgages?

Adam Martin · Answer

My biggest question is where is the money going.  You say you don't want to sell because you are cash flowing so well however you can't make your mortgages which does not make sense to me.  My assumption is you are in overages on renovations which may need to be drastically cut back.  Assuming you are able to save this cash what is going to change in the next 2-3 months of not making payments that is going to put yourself in a much better financial state.  Absent a really good answer I'd sell a couple of the higher equity properties and honor your debts.  What are your plans on cash, are you pouring them back into the business, planning to sit on a pile of cash just in case, or are you siphoning money out of the business hoping to draw income that just can't be supported at the moment.

Bogdan Constantin Stefanide · Answer

I agree with @Theresa Harris. Call your banks and ask them if they offer any options and try to work with them.

Another option is to sell one of your property, consolidate and move on...

Nathan Frost · Answer

What was the solution?

Minna Reid · Answer

By Federal law your lenders can't move towards foreclosure until your payments are 120 days behind. However you will not be able to just resume making payments after 90 days. You will need to pay the back due amounts, or apply for a loan mod or forbearance. Most lenders don't have a whole lot of programs available to non owner occupants, so call the lender and ask about their options for you before moving forward.

However, unless you are expecting some windfall of cash or an increase in income, I don't see how you will be able to start making regular payments if you can't do it now. This sounds like wishful thinking. I would start looking into liquidation options before you lose a bunch more equity to fees and interest from non payment.You would be very surprised to see how quickly your balances will increase once you stop paying.

Sara Harris · Answer

When you stop paying the mortgage payment on multiple properties, you risk foreclosure on those properties. The exact consequences may vary depending on the lender and the specific terms of your loans. It is possible that after a 60 to 90 day period, you may be able to resume normal payments, but you may also incur penalties, fees, and an increased interest rate. It is unlikely that you will be able to keep your existing interest rates or avoid paying the backpay amount. Depending on your lender, you may be able to request a forbearance, but this is not guaranteed. It is advisable to communicate with your lenders to discuss potential options and avoid foreclosure.

Samuel Eddinger · Answer

@Eric Johnson - If your rate is good, you could consider doing a "subject to" deal where the person buying gives you a cash infusion for the right to own one of those properties.  How much cash do you actually need?  I might know someone in Connecticut that could help in exchange for purchasing one or more of these properties.

Don Konipol · Answer

You’re wanting to reorganize your basic financial situation - outside of bankruptcy.  That IS the correct strategy.  Explain your situation to your creditors , ask for a 90 day moratorium on payments with the principal added to the loan balance and term extended 3 months.  Here’s what typically happens when investment loans go 90 days into default

1- loan is placed in “non per forming category”

2- non payment information sent to credit bureaus, and borrower shows “90 days late”

3- Fair Issac credit score drops 150+ points

4- credit requests get denied, credit available is at rates 5 points higher than before

5- notes are accelerated by lenders

6- legal fees are added to principal balance owed

7- the lender accelerates the loan

8- interest rate is increased from the current Rae to the “default” rate

9- late fees are added to the principal balance

What happens when I stop paying the mortgage payments ?

Most Popular Reply