What Is a Mortgage Default, and How Can I Avoid It?

Mortgage defaults can happen to anyone, and they often come as a surprise. If you’re not sure what constitutes a mortgage default or how to avoid one, this post is for you. We’ll provide an overview of what constitutes a default, the consequences of defaulting on your mortgage, and some steps you can take to avoid falling into default. If you’re not sure whether you’re in danger of default, find a qualified mortgage professional to review your situation.

Okay, so what is a mortgage default? Mortgage default is the failure of a homeowner to continue to make timely payments on an existing mortgage loan. Most homeowners think that their mortgage loans are secure, but usually this is not the case. You see, even though banks (the lenders) receive monthly payments from homeowners for the use of their homes as collateral against the loan, they may do little or nothing to stop the homeowner from walking away from their debts. Before the lender can file a foreclosure complaint against the homeowner under the New Jersey Fair Foreclosure Act, there are certain things it must do. The truth is that homeowners are frequently on both sides of this agreement and that they can be easily manipulated into giving up their homes if they fall behind in making payments. 

Ask anyone who is struggling with debt and you’ll find that their immediate pain is knowing how much money they owe and being unable to make that payment on time – if at all. For many people this can feel like an insurmountable hurdle when it comes to making those necessary monthly payments, not to mention stabilizing your own cash flow in general. As part of the process of foreclosure, we often see people struggling with how to handle the situation where they default on their mortgage, which will bring up a lot of money over the next few years. In fact, these cases are common and many borrowers find themselves unable to make their mortgage payments when they are in debt, and eventually they will lose their house. This is not what anyone wants, especially if you’re trying to deal with a mortgage in a default situation. 

When a homeowner defaults, the consequences are serious, and can potentially include losing everything you own. A foreclosure is often the result of defaulting on a mortgage loan, and it occurs when the lender takes possession of your home after you’ve failed to make payments for an extended period of time. In fact, by law lenders may foreclose on homes even when borrowers are making payments in an effort to encourage borrowers to catch up with missed payments. 

It’s easy to get caught up in the mortgage process without fully understanding what it’s all about, and even more importantly, how to avoid defaulting on your loans. In the state of New Jersey, Under federal mortgage servicing laws, a lender can’t initiate a foreclosure until the borrower is more than 120 days delinquent. What this means is that if the homeowner is more than 120 days behind on their mortgage, the lender can take them to court. 

The first thing that you should do is assess the current situation and evaluate how you can fix the problem. If you are not able to pay your monthly mortgage payment, then it’s time to talk with your lender and figure out what the next steps need to be in order for this loan to become affordable again. The lender may offer a variety of different solutions, such as taking payments in exchange for a deed of trust or accepting payments in lieu of foreclosure. In both cases they will be willing to continue accepting monthly payments even if they have missed three on their own accord, but they have other options available if things aren’t working out. They can accept a deed in lieu of foreclosure or accept a letter of credit which allows them to take possession immediately. In either case, the lender is willing to work with you to make your mortgage loan affordable again. It’s important to point out that this is only true if your lender is offering any solutions at all, so please do not hesitate to contact them! It may even be necessary for you to speak with a qualified mortgage professional to help you evaluate which options are most appropriate based on your situation.

A lot of people get into debt because they often don’t have cash flow and this can be a big factor in the increase in debt. That said, many people struggle with how to make their mortgage payments when they are struggling with debt. There are federal programs available that can provide solutions to this problem and help you avoid foreclosure. It’s important to point out that any solutions at all will depend on your lender so if you’re having problems please contact them!

It’s especially important to know what the foreclosure laws are in your state, as there are different foreclosure laws across the country. New Jersey is considered a judicial foreclosure state, meaning that if a mortgage is defaulted, the lender must go to court in order to repossess their home. Nonetheless, there are also federal programs available today that may also be able to help you when dealing with mortgage defaults. For example, the FHA Home Affordable Modification Program (FHA HAMP) is a government initiative that was created to help homeowners who are struggling with making payments. This program helps homeowners in New Jersey to bring the mortgage payments back on track for distressed borrowers. The main way FHA HAMP works is by allowing financial modifications of your mortgage to avoid foreclosure. The FHA-HAMP modification works by helping avoid foreclosure by permanently decreasing your monthly mortgage payment through the use of a “partial claim.” However, NJ residents would only benefit from this program if the New Jersey homeowner who only has an FHA mortgage. 

The thing about homeownership is that it may be difficult to maintain over time, even if you’re able to keep up mortgage payments the overall expense of owning a home can still cost a lot more than staying on rent. This is an issue faced by many individuals who have to struggle with their mortgage payments every single month. For some people they may not even be able to make a mortgage payment at all. It’s important when trying to manage your debt that you know what steps you can take to help you avoid the worst case scenarios and do everything possible to make your mortgage sustainable in the future.

Need help rescuing your home investment? Contact NJ Foreclosure Rescue today!