Why Did My Bank Refuse/Return My Mortgage Payment?
If your bank has refused to accept or returned your mortgage payment they are likely preparing to file foreclosure against you. The reason they refuse or return your mortgage payment rather than just filing the foreclosure as soon as you fall behind is federal regulations prohibit the filing of foreclosure unless the mortgage is more than 120 days delinquent. However, the bank is not required to accept all payments and a bank is well within its right to reject a payment that does not bring the account current. If you provide payment in an amount that will bring the account current the bank will usually be required to accept the amount, but often if your payment is declined it means your account is delinquent and the payment you have provided is not sufficient to bring it current. Homeowners are often surprised that the payment they submitted did not bring the account current as often the bank will have been consistently accepting the proffered payments in the months preceding the rejected or returned payment. To understand how the bank could have accepted the payments in the months leading up to a month in which the bank rejected the payment requires understanding the way in which the accounting is done for a mortgage loan.
Understanding Mortgage Loan Accounting
Frequently, the payment that has caused a homeowners account to fall delinquent was missed long before the month in which the payment was rejected. If a payment is made, it is applied to the earliest unpaid payment. That means if you miss a payment in January and then subsequently pay your February payment on time, the accounting sheet kept by the bank will show that the January payment has been paid late and the February payment has not yet been made at all. Because the January payment was made late, late fees will be assessed for January and because the February payment will be considered unpaid late fees will also be assessed for February. What generally happens is this will continue for several months until the late fees accrue to equal an amount similar to another month or two of missed payments. At this point the bank makes the determination that you are unlikely to bring the account current and starts the foreclosure process. Before the bank can foreclose they must ensure that the account is at least 120 days delinquent. Accordingly, the bank makes the decision to reject or send back any payment that does not bring the account current. Once a payment is 120 days delinquent the bank will then be able to file the foreclosure against you.
Will I Lose My Home?
If you have had a mortgage payment refused, rejected or returned it does not mean that you must lose your house. However, it does mean you should secure counsel as soon as possible. Our attorneys can request records from the bank and identify whether the bank has misapplied payments or exactly which payment was missed. We can then work with you to create a plan helping you to either defend the foreclosure based upon any misapplied payments or work to get your loan modified. If you have further questions about why your mortgage payment was rejected or returned or are serious about saving your home call us today for your free consultation.