The legal rights a collection agency has to seize your assets vary by state. If the company secures a lien against your property, however, it has the right to foreclose on the home at any time during the lien's active period. Collection agencies frequently place liens on property but rarely use those liens as a foreclosure tool. Should the company foreclose on your home, it's unlikely that it would do so for a 90-day delinquency.
Original Creditors
Original creditors do not send consumer debts to collection agencies until the company exhausts all attempts at recovering the debt on its own. Credit card companies, for example, do not charge-off delinquent accounts until the debtor has not made a payment on his debt for 180 days. Although a credit card company can sell a debt at this time, some pursue further collection options after the charge-off--taking your delinquent account far past 90 days late.
While not all creditors wait 180 days or longer before selling nonperforming accounts, a lawsuit is not a collection agency's initial course of action. Thus, losing your home to a 90-day delinquency is highly unlikely.
Collection Lawsuits
Before a collection agency can attach a lien to your home and foreclose on the property by calling the lien due, it must obtain a judgment via a lawsuit. Lawsuits are both time-consuming and costly for a collection agency and, as such, serve as the company's last resort when recovering consumer debts.
Even if your original creditor transfers your delinquent debt to a collection agency after 90 days, the collection agency will try to collect from you via telephone calls, payment plans and settlement offers before taking the case to court. By the time the company sues you, your debt will be well beyond the original 90-day delinquency.
Judgment Foreclosure
By placing a lien on your home, the collection agency ensures that you cannot refinance the property without paying off the lien. Selling a home with an outstanding lien is also problematic, since most buyers' mortgage companies will refuse to finance real estate that carries outstanding liens. Thus, a judgment lien is advantageous as a collection tool without the need to foreclose
If the collection agency does foreclose on your home, it must pay off any lien holders that attached liens previous to the collection agency's lien. The company must then sell your property for enough money to cover your debt, the foreclosure costs and the costs the collection agency incurred by paying off your previous liens. Because this process is time-consuming, expensive and carries no guarantees of proper compensation, few debt collectors take this route when recovering debt.
Additional Consequences
If you let 90 days pass without submitting a payment to your original creditor, the missed payment notations on your credit report wreak havoc on your credit score. Future creditors will consider you a much higher lending risk if your credit report carries a 90-day delinquency. Because collection accounts are inherently negative, however, being 90 days late on your payment to a debt collector does not cause further damage to your credit report.
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