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What happens if you don’t pay the mortgage?

We all talk about what if’s. One big “what if” that many homeowners have today has to do with mortgages.

About one-third of South Florida mortgages are underwater, meaning the homeowners owe more than the home is worth at today’s depressed prices, according to First American CoreLogic. Some homeowners are certainly wondering why they’re sending in the payment on, say, a $300,000 mortgage, when the house today would sell for only $210,000.

Your options: Keep paying or try to change your loan’s terms.

But some people wonder, what if I just stop paying the mortgage? It may be a tempting idea, but it quickly leads to trouble.

Here’s what could happen if you don’t pay the mortgage.

Report to the credit bureau

If your payment does not arrive, your lender or servicer will report this late payment to the credit bureau by the first day of the next month. This can happen in as little as two weeks from due date and put a negative mark on your credit report. Your credit score drops.

The late payment report whacks your credit rating. Your credit score starts to drop, by up to 200 points, if this is your only late or missed payment.

Cards are closed, rates rise

In the next 30 days, you can expect your other creditors to take note of the late payment and to take action. They can raise your interest rates, shut off your credit card entirely, or lower your credit limit. You also could face other changes in your financial life, because auto insurance, student loans and other forms of credit are pegged to your credit score.

Tightening of credit lowers your score

Credit scores feed on themselves. If your credit card limits are lowered and you are carrying a balance, you are then using more of your available credit, something known as your utilization rate. When that goes up, it lowers your score some more.

The negative mark stays on your credit report for seven years. But the impact on your credit score lessens over time. The biggest impact is for the first two years.

Lender response

The phone will start ringing. Your lender will try to contact you, try to persuade you to go into a loan modification of some kind.

But after 90 days, you cannot just start making payments again. The lender may actually send your payment back, if you send it this late and have not been in contact.

What happens next

After four months of not paying your mortgage, you will likely be served with a foreclosure notice.

If you don’t respond within 20 days, then the lender, in the following 60 days, will ask a court to issue a judgment against you.

A county sale will be arranged 50 to 120 days after the judgment. Next, 120 days after the sale, the sheriff will be at the door. Ten days after that, you’ll be thrown out of your home.

(Tip: This schedule is a general one. Courts are facing a backlog of foreclosure cases and could take longer to go through these steps. If you hire a lawyer and fight the foreclosure, you may be able to delay the sale for many months or avoid it altogether.)