Mortgage Default and Foreclosure

by Sean A. Kelly - Date: 2010-11-09 - Word Count: 559 Share This!

A mortgage default is a condition wherein a borrower is not making payments on his or her mortgage and the loan is deemed to be "in default". This signifies that in such a situation the lender can choose to take over the property. Normally mortgage default is a situation that is clearly defined as per the terms of the mortgage agreement. The mortgage agreement generally specifies the monthly due date for the payments. Your mortgage may include a grace period of one to two weeks which means that payments made during this grace period will still be considered to be on time. Once the grace period has elapsed, the lender may start levying late fees. If more than 30 days have passed, the mortgage may be considered to be in default.

Defaulting on a mortgage can eventually result in mortgage foreclosure which would mean the loss of a piece of real estate and it should always be avoided. Even if the defaults do not lead to foreclosure, they can still drag down your credit score significantly, making it harder for you to negotiate with the lender or to secure credit for other loans in the future.

Once the mortgage is deemed to be in default, the lender can send a notice of mortgage default to a credit agency and this would have an immediate impact on your credit score. Generally the lender will then retain the services of a credit collection agency in order to try to get the homeowner's past due payments. This would add to the fees associated with your mortgage default. Many lenders in an attempt to bring the homeowner current insist on full payments including late fees and collection fees and normally do not accept partial payments in such circumstances.

Normally the lender will start the foreclosure proceedings within 60 to 90 days of determining that the mortgage has defaulted by sending a notice of default to the homeowner. While this is the first step of the process, the property owner still has a chance to make up the missed payments immediately and in full or risk losing the home through foreclosure. The lender would then need to post a public notice about the foreclosure and the property owner may have a chance to buy the property back during the foreclosure auction, if he or she can arrange the funds in cash.

Foreclosures can be amongst the most stressful times for people with extremely painful financial implications. Additionally, foreclosures also have a seriously damaging effect on credit scores and it is advisable that as soon as you become aware of an impending foreclosure on your mortgage loan, you act quickly to avoid foreclosure without even waiting for a notice of default from your lender. In such circumstances, you may immediately like to seek foreclosure help and try to save your home since the foreclosure process can start very quickly and you may not get enough time to chart out a plan of action to deal with it. If you act fast, you may be able to get more time to find an amicable solution that is acceptable to all parties, and which helps you avoid foreclosure. Whether you like to proceed on your own or hire a firm to assist you to stop foreclosure, it can always be a good idea to do all your research before you act.

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