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This is a DSI Conventional Mortgage of interest rate 8.8. The borrower is making payments but is making it past the due date of the 1st. Understanding of the DSI factor has cause interest to be calculated outside of the amount due provided in the monthly bill statement. The borrower has continued to just send in the amount due per billing statement as shown, but now there has been about three months in a row that has only been applied to the interest and non to the principal.

Monthly amount due is 670.00 of an unpaid principal of 45,000.00. Would it be reasonable to say that the cause of the monthly payments being applied to just interest is due to any past interest that has accrued and needing to be satisfied? This mortgage has not been a well on time pay history. Many changes has happened since origination from modification due to pending foreclosure and also forbearance due to Covid. Would appreciate some suggestions.

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Would be reasonable to say that the cause of the monthly payments being applied to just interest is due to any past interest that has accrued and needing to be satisfied?

Possibly, depending on how old the mortgage is and how late the payment were - a 30-year mortgage of 45k at 8.8% would have a monthly payment of about $355 with only $25 of that applied to the principal on the first payment. At 8.8%, about $11 of interest would accrue daily, so a payment only 3 days late might go completely to interest.

Since you said the payment is $670 it's not clear if the original loan balance was much higher, or if the rest is for insurance, taxes, and/or PMI (it seems like a lot for just those items).

IF the borrower has made many late payments, it's also possible that late fees have accrued that need to be paid off as well.

Would appreciate some suggestions.

Get a statement form the bank stating exactly how much unpaid interest and fees are due, and pay that off soon (you might even try to negotiate a lower amount). Then start making monthly payments on time to avoids accruing any additional interest and late fees. Set up an automatic payment if the lender supports it to force them to make payments on time. Cancel any automatic payments for other services until the borrower gets their finances in other. It's a bigger deal to be late on your mortgage and utility bills that it is to be late on your cell phone and streaming media subscription.

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  • You are correct, and I do apologize for not including also with this mortgage it has a full escrow account. The original loan amount was 58,909.00
    – Abi Gordon
    Apr 3 at 2:01
  • Note that the amount needed in an escrow account can change over time as taxes and insurance change.
    – keshlam
    Apr 3 at 2:26
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Yes, that would be reasonable. I found this very clear description of such a product, with examples describing this situation.

From there:

WHAT IF I MAKE A LATE PAYMENT?

If you miss a due date, you can end up paying more in interest than you should. Remember, interest is added daily on your daily simple interest loan. This means that every day your payment is late, more of your payment has to be put toward interest. This leaves less money to put toward principal, or in some cases, no money to put toward principal. That does not include any late fees or charges that may accompany the late payment.

Let’s go back to our original example. You are making $599.55 in payments every month, and you have a payment due on 2/5/20XX. Instead, you make the payment on 2/10/20XX. Rather than having $509.59 go toward interest, $591.84 of your payment must now go toward interest. This leaves only $7.71 to go toward principal for this month.

If you make the payment on 2/11/20XX, you have accrued $608.28 in interest for that month. $599.55 of your payment will need to go toward interest, leaving no money to go toward principal, and an additional $8.73 to be added to interest due for the next month. You can avoid future situations like these by always paying on the exact same date each month (e.g. the 5th of every month)

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