What is Late Payment Notice?
Late Payment Notice is a letter to inform the borrower that a payment is past due. It is sent to the borrower by the lender or the servicing agent for the lender. The notice may inform the borrower of a late payment, the late fees assessed, and due date of payment.
Considerations for the Borrower
Late payment can adversely affect you in a number of ways including assessment of late fees, adverse reporting on your credit report and denial of PMI cancellations that you requested. If payments have not been made over 90 – 120 days then the lender may initiate foreclosure process. Therefore, it is vital that you review the cause of the late payment notice and immediately take appropriate action.
How to Respond
If you believe you had made the payment then check your bank statement, check register, or bill pay account to see if you had made the payment. Next call the servicer or check your online account to verify if the payment has posted on your mortgage account. Your situation may fall in one of the following cases.
Case A: When you have made the payment but it was not received by servicer.
If your payment has not been received by the servicer then it may be due to the following:
- Lost/Stolen Check: First call your bank and put in a stop order on the original check. Checks can take up to 2 days to process and a stop order may not be placed in time to prevent the check from posting. Therefore, wait for couple of days and then write a new check to the servicer. If you are close to the date when late fees will be assessed then send the replacement check as soon as you can, as long as you have money in your account to cover two checks if they get posted.
- Insufficient Funds: Was the check returned or payment rejected due to insufficient funds. In this case ensure you have the funds and make the payment promptly.
- Servicing Transfer: Verify if the servicer has changed. You should have received a servicing transfer disclosure which contains the effective date of transfer, the last day on which the old (transferor) servicer will no longer accept payments, and the date on which the new (transferee) servicer will begin to accept payments. If you have made a payment to the old servicer, then call them and find out the status of your original payment. As per CFPB Regulation X, you have up to 60 days from the effective date of transfer of servicing before you will be assessed a late fee if you have made the payment to the old servicer. If the old servicer no longer accepts payments then update your address book and send the payment to the new servicer. Also, put a stop payment order on your original payment.
- Errors with Funds Transfer: If you are using ACH, Bill Pay, or other forms of electronic funds transfer then verify if the payment went through. There may have been an error such as the payment failed to initialize, the payment got rejected, or it was sent to the wrong account. Contact your bank and determine the cause. You may be able to file a complaint under CFPB Regulation E to have the error corrected by your bank.
- Payment Adjustment: An adjustment in an ARM loan or expiry of the introductory rate will cause your payment to change. If your payment was less than the adjusted payment then the difference may have caused the late payment. Pay the remaining portion and be on the lookout for future changes in payment.
Case B: When you have made the payment but it did not post.
- Error on Part of Servicer: If you believe you made the payment correctly and there is an error on part of the servicer then file a complaint with the servicer to have it corrected. This is known as a Qualified Written Request (QWR). The servicer is required to investigate and respond within 60 days after receiving a QWR from you. Learn more about QWR.
Case C: When you have not made the payment
You may have not made the payment due to an oversight on your part. In this case, make the payment as soon possible. If you passed the grace period for late fees then make sure your payment covers the late fee as well. Also, there is never any harm in calling the servicer to see if they can waive the late fees or at least not report it to the credit reporting agencies. Based on your charms and past payment history, you may win some relief.
Case D: When you are in distress and cannot make the payment
If you are in financial distress then it is important to contact your servicer as soon as possible. If you emergency is short term then the servicer may be able to provide some reprieve or alternate options. If your difficulties are longer term then also work with the lender to see if they can offer any modifications or forbearance. Last thing you want to do is to ignore the late payment notice.
Follow Up Actions
Check Credit Report
Late payments start getting reported after you are more than 30 days late. Monitor your credit report and ensure that it accurately reflects the payment history. If there is any discrepancy then call the servicer to make corrections. You may also file a dispute with the credit reporting agencies.
Verify Late Fee
Mortgage loans usually provide for a grace period after the due date during which the late fee will not be assessed. If you make the payment before the grace period then ensure that the payment will be received before the end of the grace period. Also, check the payment coupon or statements to ensure that any inappropriate late fee is not assessed.