Behind on Mortgage Payments in California? Your Options Before a Notice of Default

Part of: Selling a house during financial hardship

If you’re behind on mortgage payments in California but haven’t received a notice of default, you usually still have time, and more options now than you’ll have later. Federal rules generally keep a servicer from starting foreclosure until the loan is more than 120 days past due. California also requires the servicer to contact you about alternatives before a notice of default can be recorded. Use that window to call your servicer, talk to a free HUD-approved housing counselor, and decide whether keeping or selling the home makes more sense.

What happens after you miss a mortgage payment?

The details depend on your loan, but the general sequence looks like this:

1. Grace period and late fee. Most loans allow a short grace period after the due date. After that, a late fee is added, in the amount set in your loan documents.
2. Credit reporting. Once a payment is 30 or more days late, the servicer may report it to the credit bureaus. Each additional month late can be reported too.
3. Outreach. The servicer should contact you about loss-mitigation options, which are the alternatives to foreclosure. Open those letters. They often contain deadlines.
4. The 120-day mark. Federal rules generally keep a servicer from starting the foreclosure process until the loan is more than 120 days delinquent.
5. Notice of default. In California, the formal foreclosure process begins when a notice of default is recorded. After that, the timeline is set by statute. Our pre-foreclosure guide walks through each stage.

The takeaway: the months before a notice of default are the most flexible time you’ll have.

What options do you have to keep the home?

Forbearance. Your servicer temporarily pauses or reduces your payments while you recover from a short-term hardship, such as a job loss or a medical issue. You still owe the skipped amount. Ask exactly how it will be repaid afterward.

Repayment plan. You catch up by paying part of the past-due amount along with each regular payment for a set period. This works best when the hardship is over and your income has recovered.

Loan modification. The servicer permanently changes your loan terms, such as the interest rate, the term, or how the missed payments are handled, to make the payment affordable. You’ll usually need to submit a complete application with proof of income and a hardship letter.

Programs for government-backed loans. FHA, VA, and USDA loans, and loans owned by Fannie Mae or Freddie Mac, have their own loss-mitigation options. Ask the servicer which investor owns your loan and what that investor offers.

Reinstatement. You pay everything that’s past due, plus allowed fees, in one payment. In California you can generally reinstate until five business days before a trustee sale, but it’s much cheaper to do it early.

Get free help. A HUD-approved housing counselor can review your budget, help you complete a loss-mitigation application, and talk to your servicer with you. You can find one through the Consumer Financial Protection Bureau. The CFPB also has plain-language help for homeowners having trouble paying.

What should you avoid?

• Paying anyone up front to modify your loan. California restricts collecting fees before loan-modification services are performed. Housing counselors are free or low-cost.
• Signing your deed over to someone who promises to “take over the payments” or “handle the lender.” A legitimate sale closes through escrow, with a written payoff and title insurance.
• Ignoring the mail. Servicer letters and recorded notices carry the dates that decide your options.
• Waiting until the last few weeks. Every option, including selling for a fair price, gets harder as a sale date approaches.

When does selling make more sense than keeping the home?

Keeping the home is often the right goal. Selling may be the better choice when:

• The payment isn’t affordable long-term, even with a modification.
• You have equity you’d lose to late fees, interest, and foreclosure costs if things drag on.
• The house needs repairs you can’t fund.
• You’d rather choose your move date than have a lender choose it.

When you sell, the loan, the past-due amounts, and allowed fees are paid off from the sale proceeds at closing. Whatever is left is yours. If the proceeds won’t cover the payoff, the sale becomes a short sale, which needs the lender’s approval. Talk to a real estate attorney and a CPA before going that route.

How do a cash offer and a listing compare when you’re behind?

A cash offer (Alex is the buyer). Alex buys for his own account through Synergy Real Estate Group. A cash sale is sold as-is, with no buyer financing or appraisal, and it usually has a shorter, more predictable timeline. That matters when payments are adding up. Alex has an interest in the price, and a lower price is better for him. Read how a cash offer is calculated so you can judge any offer, his included. If a notice of default has already been recorded, California law gives you extra protections when you sell to an investor, including a short window to cancel after signing.

An open-market sale (Alex is your listing agent). Alex represents you through MGR Real Estate. A listing usually brings a higher price, which protects more of your equity, but it needs more time: preparation, showings, and a buyer’s financing. If you’re behind but a notice of default hasn’t been recorded yet, you may have that time. Outside his direct service area, Alex refers you to a partner brokerage, which may pay him a referral fee. Alex will not charge you a referral fee.

Neither path obligates you. Compare them side by side.

A simple plan if you’re behind on mortgage payments

1. Find your most recent statement and every servicer letter. Note any dates.
2. Call your servicer. Ask what hardship options exist for your loan, and ask for written reinstatement and payoff figures.
3. Book a call with a HUD-approved housing counselor.
4. Estimate your equity: roughly what the home would sell for, minus the payoff figure and selling costs.
5. If selling is on the table, get both numbers: a cash offer and an estimate of what an open-market sale might bring. Then decide with the full picture.

Frequently asked questions

Keep reading: Selling a house during financial hardship · Selling a house before foreclosure

On a cash sale, Alex Gonzalez, California Real Estate Broker DRE #01384006, is the buyer for his own account through Synergy Real Estate Group. On an open-market sale, Alex is your listing agent through MGR Real Estate under a separate listing agreement. Outside his direct service area, he refers you to a partner brokerage, which may pay him a referral fee. Alex will not charge you a referral fee. This article is general information, not legal, tax, or lending advice. No sale price, offer, closing date, or foreclosure outcome is guaranteed.