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What You Need to Know About Defaulting On Your Mortgage

By June 23, 2022No Comments

Times have gotten tough. You find it difficult to keep up with your bills, and among these bills is your mortgage payment. Your mortgage payment is one of the most important payments you must make. This is because failing to pay your mortgage can potentially result in mortgage default—and the loss of your home. However, you do have options.

You will be relieved to know that there are steps you can take to protect your home and avoid home payment default if you find yourself facing tough times.

What Is Home Payment Default?

Home payment default, also referred to as a mortgage payment default, occurs when a homeowner misses too many monthly payments. When the mortgage borrower fails to make monthly payments on the home, this can have a long-lasting, negative impact. You may not only lose your home, but you may also have:

  • A tougher time getting approved for loans in the future
  • A lower credit score
  • A harder time finding a place to rent

Are There Other Ways Mortgage Default Can Occur?

While failing to make mortgage payments is the most common way for a mortgage payment default to occur, it is certainly not the only way. There are other ways a mortgage payment default can occur, these include:

  • Failing to pay property taxes
  • Using the property for illegal activities
  • Officials finding out the property was purchased via illegal means
  • Transferring the home’s title without the permission of the lender
  • Failing to occupy the home if it states in your mortgage contract that you must do so
  • Not paying your homeowners insurance

What Happens When a Home Payment Default Occurs?

If your mortgage defaults, your lender will allow you the opportunity to take advantage of available loss mitigation options. Your lender wants to help you keep your home, so they want you to apply for loss mitigation and will assist you in the process. However, if you avoid working with your lender, you can expect to experience the following.

  • Your lender can decide to invoke the debt acceleration clause in your mortgage contract. Your lender can invoke this clause if you are over 30 days overdue on your house payment. Many lenders won’t because they are striving to work with you, but they can if they choose. If your lender invokes the debt acceleration clause, you must come up with the entire balance of the amount that is overdue. If you do not pay the balance in full, then the lender can proceed with the foreclosure process.
  • The lender can foreclose on your home. If you don’t have the funds to balance your account and you have exhausted all other options to bring your account out of delinquency status, the lender can proceed with foreclosure. Usually, you must be late for 120 days or more on your loan; however, the laws depend on the state.
  • If you do not pay the overdue amount before your lender completes the foreclosure process, you can lose your home. However, during the foreclosure process, you still have an opportunity to resolve the delinquency on your mortgage account.

Can You Be Forced to Leave Your Home When Foreclosure Is Complete?

After your lender completes the foreclosure process, they will proceed with a formal eviction notice. The formal eviction process differs depending on your state; however, the following can happen.

First, you may receive a notice from your lender that tells you that you need to leave the property. In some states, you can be given a few weeks to vacate. If you fail to leave your home, then you can be forced to leave by the authorities.

Can You Avoid Defaulting on Your Loan?

The good news is that there are a variety of things you can do to avoid defaulting on your loan. It is essential that you reach out to see what your options are. Sure, reaching out can feel uncomfortable and even embarrassing; however, there are a variety of services available from impartial and compassionate professionals. Some options you may have to prevent default are:

  • Obtaining a modification to your loan
  • Checking to see if you can refinance
  • Getting in touch with financial counselors at HUD

Selling the Home

If you have not completely defaulted on your mortgage, you can always sell your home. You can either sell your home the traditional way or apply for a short sale. Be sure to evaluate which option will best suit your situation before selling.

We understand that the thought of defaulting on your home can be scary. The good news is there are things you can do to fix the situation and remain in your home. If you are a resident of Houston or Chicago and you are at risk of defaulting on your loan, contact Vilt Law, P.C. straight away. We are confident that we can keep you from losing your home. Our experts at Vilt Law, P.C. have helped countless clients navigate difficult situations. When you work with us, you can rest assured that you can have peace of mind. In addition to giving you a source of support, we can help you rebuild. We have the necessary tools to help you recover and get back on your feet so you can get a new lease on life.