Definition of 60-Plus Delinquencies
In the context of home loans, 60-plus delinquencies refer to mortgages where the borrower has failed to make their monthly payments for 60 days (two months) or more. This can emerge due to various financial stresses or mismanagement, signifying a higher risk of default and potential foreclosure.
Consequences of 60-Plus Delinquencies
Foreclosure Process
If a mortgage remains delinquent beyond 60 days, the lender may initiate the foreclosure process. This legal procedure allows the lender to recover the balance of a loan by taking possession of the mortgaged property. Key stages include:
- Notice of Default: Lender sends a formal notice to the borrower indicating the default and the intention to foreclose.
- Pre-Foreclosure: A grace period where the borrower can rectify their account by paying the overdue amounts plus any additional fees.
- Auction: If unpaid, the property is typically auctioned off to the highest bidder.
- REO (Real Estate Owned): If no bids are sufficient, the lender takes ownership of the property.
Examples of 60-Plus Delinquencies
Consider a homeowner who bought their house with a $300,000 mortgage. If they miss payments in January and February, their mortgage is classified as 60-plus delinquent on March 1st. If not addressed quickly, this can progress into foreclosure, culminating in their home being auctioned by June or owned by the lender.
Historical Context and Applicability
Historical Context
The concept of mortgage delinquencies, including those exceeding 60 days, gained significant attention during historic financial crises, notably the 2008 subprime mortgage crisis, where many borrowers defaulted on their loan payments, triggering widespread foreclosures and economic downturn.
Applicability
Understanding 60-plus delinquencies is crucial for:
- Borrowers: To grasp the gravity of missing payments and the importance of seeking assistance if financial difficulties arise.
- Lenders: To assess risk and handle delinquent accounts effectively to mitigate losses.
Comparisons and Related Terms
Comparisons
- 30-Day Delinquency: Refers to loans overdue by one month, a preliminary stage before escalating to 60-plus delinquency.
- 90-Day Delinquency: Indicates a loan overdue by three months, commonly leading directly to foreclosure procedures.
Related Terms
- Default: The failure to meet the legal obligations of a loan, which usually occurs after 90 days of missed payments.
- Foreclosure: The legal process where a lender seeks to recover the amount owed by taking ownership of and selling the mortgaged property.
FAQs
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What can a borrower do if they are 60 days delinquent?
- They should contact their lender immediately to explore options, such as loan modification or repayment plans.
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How does a 60-day delinquency affect credit scores?
- It significantly negatively impacts credit scores, reflecting the borrower’s increased risk to lenders.
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Can delinquency be removed from a credit report?
- Delinquencies can remain on a credit report for up to seven years, but some lenders may remove them if the account is brought current and satisfactory explanations are provided.
References
- Federal Housing Finance Agency (FHFA). “Foreclosure Prevention Report.” FHFA.gov.
- Consumer Financial Protection Bureau (CFPB). “Mortgage Delinquency Procedures.” CFPB.gov.
Summary
Understanding 60-plus delinquencies is fundamental for both borrowers and lenders, offering insights into the causes, consequences, and the critical nature of timely mortgage payments. Awareness and proactive measures can prevent the progression from delinquency to foreclosure, preserving homeownership and financial stability.
