Late Payments and Bad Credit
The borrower sometimes makes late payments on his home loan. This can happen for any number of reasons.
When the note is signed by the borrower, it will include the day of each month that the loan payment is due. The note will also include a definition of when a payment is late. After a specific time, a late fee is assessed to the borrower. This is often ten to fifteen days after the due date of the mortgage payment.
The amount of the late fee is also specified. Sometimes it is a set amount. In some notes a percentage of the payment due is assessed (usually, but not always, about 5 percent of the amount of the principal and interest payment). The late fee serves as a penalty to help insure the borrower makes the monthly payment on time.
While most borrowers make the monthly payment on time, some pay late either intentionally or unintentionally. The lender assesses a late fee based on the amount specified in the note, and the borrower pays that fee. The loan account is then brought current.
Foreclosure problems really begin when a payment is not made within thirty days after it was due. It signals a huge problem for the lender. It indicates the borrower is in financial peril.
