Collection
Definition and meaning of Collection in real estate.
Collection is the process where a mortgage servicer or lender contacts a borrower who is delinquent on their payments to recover the outstanding debt and bring the loan current. This procedure begins when a payment is missed and continues until the delinquency is resolved or foreclosure begins.
In more detail
During the early stages of collection, representatives contact the borrower by phone or letter to request payment and understand the reason for the delay. Lenders are often willing to discuss loss mitigation options, such as loan modifications or repayment plans, during this phase to avoid the high costs of foreclosure.
If the borrower remains unresponsive or cannot make payments, the collection efforts escalate, and the account may be referred to a foreclosure department or third-party collection agency. Collection activities can damage the borrower's credit score, as late payments are reported to credit bureaus.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Typical timing | Starts immediately after a payment grace period expires |
| Watch out for | Late fees and negative impacts on credit scores |
| Also known as | Debt collection or loan servicing recovery |
A homeowner who missed two mortgage payments receives calls from their lender's collection department to discuss options for catching up on their balance.
Frequently asked questions
Can a lender foreclose as soon as collection efforts start?
No, federal laws generally prevent lenders from starting foreclosure until a mortgage payment is typically more than one hundred and twenty days delinquent.
How can I stop a mortgage from going to collection?
The best way to prevent collection actions is to contact your lender immediately if you expect to miss a payment and request a forbearance or payment plan.