A mortgage loan default is a situation in which someone is not making payments on his or her mortgage, and the loan is considered to be “in default,” meaning that the agency which holds the note can choose to take over the property. Defaulting on a mortgage loan can result in the loss of a piece of real estate, and it should be avoided at all costs. Even if the property is not lost to the bank, a mortgage default will drag down a credit score significantly, making it harder to negotiate with the bank or to secure credit for other loans in the future. When a mortgage is issued, a monthly due date for payments is usually specified. Many mortgages include a grace period of one to two weeks, meaning that payments sent during the grace period will still be considered on time. After the grace period has elapsed, however, late fees will start to be levied. If more than 30 days after the due date go by, the mortgage is considered to be in default.
Once the bank determines that the 30 days has elapsed, it can send a notice of mortgage default to a credit agency, impacting the credit score immediately. Within weeks, the bank will usually retain the services of a credit collection agency in an attempt to get the homeowner’s past due payments. This adds to the fees associated with mortgage default. Many banks will also insist on a full payment including late fees and collection fees to bring the homeowner current, and they will not accept partial mortgage payments when the mortgage is in default.
Worse Consequences of Defaulted Mortgage Loans
If your mortgage home loan goes defaulted, you will lose the right to deferments and forebearances. You will have to suffer the consequences of your defaulted mortgage loan. Moreover, you may not be offered any additional Federal student aid. You cannot have escape from the brunt of your mortgage debt unless you make payments for at least 6 consecutive months.
If the student loan that you have borrowed is declared in default, the following are the consequences
- The case of your defaulted mortgage loan may be handed over to a debt collection agency
- The collection agency will be entrusted with a responsibility to collect the mortgage loan
- You will be charged the cost associated with the collection of your mortgage loan
- You will be liable to pay court costs and attorney fees other than collection fees
- You can be dragged to court in case of your defaulted mortgage loan
- The amount that your wages is garnished with may be limited by Federal law
- Your may face the interception of your state and federal income tax refunds
- Part of your Social Security benefit payments may be withheld by the Federal government
- The defaulted loan will negatively affect your credit record and make you suffer its detrimental effects
- You will find it difficult to obtain a mortgage loan, an auto loan and even credit cards
- You will be denied deferments, federal interest benefits and renewal of your professional license
Harassment from Collection Agencies because of their Unfair Collection Practices
You will be moved from the frying pan to fire, when the collection agency will begin haunting you like hounds. The situation becomes worse, when you fall prey to their unfair debt collection practices. They will trouble you making frequent calls now and then. They are very likely to publicize your defaulted loan status that will in turn, make you suffer disgrace on your social reputation and feel embarrassed among your neighbors, friends and relatives. Sometimes, their approaches for debt collection go far to be abusive and offensive. The collector not only violates the Fair Debt Collection Practices Act but also your consumer rights to be treated fairly. Contact us and we will protect you by means of legal support from the embarrassment and harassment in the hands of the debt collector.