What is a Mortgage Default?

What is a mortgage default?

2 Answers

A mortgage default is when you have missed 3 or more payments on your home (90+ days).  At this time the lender will start the Foreclosure proceedings with their attorney. Most lenders will stop taking your payments at this time even if a payment is sent in to them.

Foreclosures are very costly to the lender and they are now trying to avoid them.  Communication with the lender is the key at this point.  Calling the lender after the first missed payment can be very beneficial as lenders are more willing to work with people at this point to try and avoid the foreclosure process. 

Every lender will handle this differently. Depending on how many payments have been missed, a Work Out Plan may be best to bring your mortgage current. If the reason for the delinquency is a temporary situation, ie. temp job loss,and you can prove your income has returned to normal, then a restructuring of the payment  to bring the mortgage current maybe in order.  Most Work Out Plans will have specific deadlines to avoid the foreclosure. Most will add the delinquent amount onto your payments and will be paid back in 12-24 months and then payments will go back to normal monthly payments.

A mortgage contains a series of promises that you, the borrower, make to the lender as part of the loan contract.  When you break any of those promises, you have defaulted on your mortgage.  The most important --and the most obvious-- of these promises is that you make the specified payments on time.  Now, the questions of whether the lender decides to enforce its rights in case of a default and when it decides to do so are altogether different. 

In the case of default, the first thing the lender has to do is " declare a default," which in layman's terms means something along the lines of "calling you out."  Typically, lenders happen to do this after you get three months behind in your payments.  You'll get a letter from the company or its lawyers saying, "hey, you need to pay up.  If you don't get current within X days, we'll start foreclosure proceedings." 

If you've got a situation where there's something that makes you think you might be in default, you definitely want to consult an attorney.  An experienced one should be able to give you an idea of what the possible ramifications might be, and, give you some ideas as to handle the possible outcomes.  They might even have some idea as to how inclined the lender might or might not be to enforce the default in your particular situation.

Best of luck!