Will Lenders Accept Partial Mortgage Payments?

Partial Mortgage PaymentsQuestion: Can you tell me why it’s okay for mortgage companies to reject partial payments when a borrower is behind? It seems to me that it’s bad business and not too good for the economy.

Answer: Many mortgage servicers — but not all — are reluctant to accept partial mortgage payments from delinquent borrowers because they worry that by taking less than the full monthly amount they may be seen as waiving their right to foreclose and even opening the door to a suit for wrongful foreclosure.

Also, loan program rules sometimes prohibit the acceptance of partial payments.

For instance, VA borrowers can prepay their loans in whole or in part without penalty. The catch is that according to the VA the term “in part” means “partial payments may not be less than 1 monthly installment or $100, whichever is less.”

If mortgage servicers — the companies that collect payments for mortgage investors — do accept a partial payment they must credit the oldest missing payments first. They also need to be certain that the borrower understands that the lender is not giving up any of its rights to foreclose.

The ability to foreclose varies by state so a partial payment from a delinquent borrower may be something a mortgage servicer would like to accept but can’t because of investor agreements, mortgage rules and court cases.

For details, speak with your mortgage servicer or a local attorney who handles foreclosures.


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