When an institution lends money to a borrower, it is because the lender saw that the borrower is a responsible homeowner and has the capability to pay the mortgage and intends to pay the on time.

But still, things happen - people lose their jobs, some become temporarily disabled or sick, some incur unexpected medical expenses or have to make a choice between paying the mortgage and repairing the car that gets them to the job that pays that mortgage. With this sometime, mortgage payments become the second priority and problems regarding the mortgage arise. What happens after missing out payments are:

1. 15-day grace period

Upon missing out payment, a 15-day grace period is given to the borrower. Mortgage notes usually carry a fifteen day grace period. Usually, the borrower wait for the last day of the 15 day grace period before paying as no one including the lender think very much about it. You can do this as you can apply the float while waiting for the last day of the grace period.

2. 16th day

But when the grace period is also missed, starting on day 16, additional debt is incurred in the form of the mortgage late payment fee - usually a percentage of the principal balance. At this point there are no harsh outcome beyond that late fee and maybe a "friendly call" from the lender's customer service department to remind the borrower. The late payment probably will not even show up on the borrower's credit report.

3. 30th Day

But when it reaches Day 30, things will change as the borrower is now in default and things quickly turn serious. Past day 30, some lenders may insist that everything be brought to current. Lenders may even return a check that does not cover both current and past due payments and maybe the late charges fee. Though some may be friendly who ill take in partial payments.

Laws regarding mortgage default and foreclosure differ from state to state and mortgage lenders and servicing companies vary in the way they approach delinquent borrowers. The big mortgage gatekeepers such as Freddie Mac and Fannie Mae have changed their approach to managing delinquencies in the last ten years, having finally realized that it is more cost effective to help a borrower to stay in his home than to pursue foreclosure and then confront the need to deal with owning, managing, and selling the resulting real estate.

4. 45th Day

By day 45 and the overdue payments are not yet cleared, the borrower will be receiving regular phone calls from the mortgage collectors. The calls are guided by rules: the frequency, contents (threats are not allowed), and timing (generally no early morning and late night calls). The calls, as long as it is within legal boundaries, will be relentless and the tone can vary from “we just want to help, when can you make payments?" to aggressively demanding.

4. 60th Day and Beyond

After the 60th day from the 1st day of missed payment, the lender will send out a notice of default to the borrower through a Certified Mail. This will give the borrower a definite period to address the situation. Also, during this time there is an additional cost to the borrower which is the collection costs. And if still this was not resolved after the remedial period which is usually 90 days after missing the payment and no action was made, the collection department will refer the loan to the lender's legal department.

When it reaches this situation, the legal department of the lenders sends documents to a local attorney to begin foreclosure proceedings. By this time serious legal fees will be accrued to the borrower.
A foreclosure is a legal proceeding and there are criteria that must be met. Once the case is already with an attorney the impending foreclosure will be advertised in the local papers and in the largest and closest metropolitan daily.

The entire process can take a very long time from initial default to the actual public auction of the property. The longer the foreclosure takes, the greater the debt that accrues and the larger the liability the homeowner has, something that will become critical down the road especially when the borrower intends to acquire the property again.

Homeowners are given every opportunity to stop the process leading to foreclosure. In some states, there is a period after the foreclosure during which the homeowner have the right of redemption where he/she can redeem the property. It is important to know this because the not so ethical lenders and servicing companies will tell borrowers that, once default has occurred, the acceleration clause of the mortgage is invoked and the entire mortgage balance is due and payable - in other words, if a borrower misses his $1,500 payment for several months and now owes $4,500 plus late fees and legal expenses, he must come up with the entire $250,000 mortgage balance in order to stop the foreclosure. This may be officially true but it is rarely brought into play during the actual process.

The bottom-line: Never miss a mortgage payment!