Mortgage DefaultMortgage default, simply put, is when you don't pay your mortgage on time. Depending on your lender, there is different grace periods and late fees assessed, so you need to be sure about your own specific circumstances when talking about mortgage default.Grace periods are generally 15 days, but they may be as short as 10 days. On day 16 or day 11, the day after the expiration of the grace period, a late fee is assessed and you may receive a "friendly reminder" telephone call from your lender about the missing mortgage payment.
The usual fee represents 3% of of the principal balance. If a payment is issued by day 30, there will probably be no ramifications beyond the late fee. On day 30-35, depending on your mortgage company, the borrower is now in default and the delinquency may now be report to all three credit bureaus (Equifax, TransUnion and Experian). If the homeowner is unable to emit payment after 30 days and the delinquency progresses, the homeowner could utilize many approaches to handle his or her default. If the property owner is able and willing to make the late payment, some lenders will allow payment installments as others will demand the payment in full to avoid further charges and legal procedures. In the past, some lenders would go as far as returning a mortgage payment check if the check did not include both the late and current payments due. Fortunately nowadays, given the current economical crisis and pressure from the government, lenders have been a bit more lenient in regards to mortgage defaults.
Lenders take mortgage default seriously!If by the 45th day of default, the payment does not post to the homeowners account, the lender's customer service department typically forwards the borrower's file to the collections department. The phone calls at this point in time are less friendly and more frequent. Some lenders may send out threatening letters mentioning foreclousure in their attempt to collect what's owed. In previous years before our current recession, within 60 to 90 days of default, 90 days being the more common time frame, the homeowner will receive a Notice of Default via Certified mail, giving the borrower 90 days to cure all late payments in order to avoid foreclosure. The reality of Notices of Default at this point in time is that no one really knows when it will be recorded. Lately, it's been anywhere from 90 days up to 12 months after initial default. From experience, when the homeowner has an active loan modification request pending, the lender may take longer to record a Notice of Default, especially if an attorney is involved. However, there are no guarantees as to how a lender will act or react to a 60+ day default. When the Notice of Default is recorded and the files are in the hands of the Collections Department, collection fees are being accrued and added to the amount in default.Review your state's foreclosure laws to be sure you know what your rights are as a homeowner.Supposedly, Freddie Mac, FHA and VA have implemented new avenues in the manner in which they manage defaults in the last ten years. These companies have implied that they believe that assisting the homeowner in keeping his or her property has proven to be more cost effective then to pursue home foreclosures. Given the recent rise in foreclosures and the amount of unsuccessful mortgage modifications, it is hard to believe these entities are actually helping homeowners in distress. |
