If a payment is delinquent, which means that it is more than 15 days late, a lender may, at its discretion, refuse to accept anything less than the full amount due, which usually includes late fees. Your loan remains current as long as you pay off a delinquent payment before the next payment becomes due. If you don't, your loan goes into default. Lenders don't initiate foreclosure proceedings until you miss payments for at least three successive months. Once they do, they may require payment of the full amount of the loan.
Negotiating a Settlement
Whether you miss a payment for personal financial reasons or for an administrative error, like a bounced check, your first course of action should be to call the lender and negotiate a settlement. If you have a history of regular payments, there is a good chance of working out a payment plan. It may include a period of forbearance, during which the lender agrees to accept partial payments, or a temporary interest rate reduction. Banks recognize that foreclosure will cost them money and are apt to work with you if you have demonstrated regularity in the past.
Not all lenders are open to negotiation, especially if you have missed payments in the past. Once your account is past due, they can require full payment of all payments owed, including late fees, before they will reinstate your loan. Once a payment is more than 30 days overdue, they can require that payment before they will accept your next installment, and when the payment is 90 days overdue, they can initiate foreclosure proceedings. Because your agreement to make payments on the dates they are due is evidenced by your signature on the mortgage note, they have the right to refuse partial payments.
Your options are limited if your lender refuses to accept partial payment on a delinquent loan. Although it is a drastic measure, you can forestall foreclosure by filing for Chapter 13 bankruptcy. During a Chapter 13 proceeding, your assets are distributed to your creditors according to a court-approved plan, and your lender cannot refuse to accept your monthly payments. If you manage to pay off the delinquent amount during the term of the bankruptcy, you may be able to negotiate a loan modification with your lender or, if not, you can continue to make payments on your current loan.