Nobody purchases a home with the intent of defaulting on the mortgage, but the reality is that a change of situation could result in being late in making payments or being not able to pay the mortgage. Mortgage default legislation and guidelines vary by lender and by state. But at about 60 to 90 days past due, all lenders will issue a notice of default (NOD) by certified mail to the borrower, which starts the foreclosure process.
What Is It?
A Notice of Default is a legal document which suggests that the homeowner has defaulted on the loan, also has a predetermined quantity of time to become current on the loan or wind up in foreclosure. In addition, it expresses the intent to market the home if all of the past due payments aren’t made in a timely way. All NODs are filed in the county courthouse before mailing to the borrower and become a matter of public record.
Timeline
From the moment the NOD is registered, the homeowner has three weeks to catch up with fees and payments. Usually, there are no legal penalties at this time; you’ll simply owe payments, late fees and penalties, if there are any. Once the three-month grace period passes, the default option gets passed into the legal department and authorized penalties start to accrue. Instantly, a notice of trustee sale is routed out; in California, this serves as notice that your home will be auctioned off in 21 days.
Negotiating with Banks
The main thing to do when served with a NOD is to contact your bank. Explain what you could do, and utilize it to think of a solution. Some banks will sue; much negotiating space is not given by others. Banks, as a company, don’t want to homes. Keeping you at the home costs than foreclosing on the home. Keeping communication lines open between the lender will most likely yield the best results.
Other Alternatives After NOD
From the time you receive an NOD, foreclosure is on the horizon. Due to the subprime crisis and current market in 2010, if you don’t have any equity in your home, a brief sale could be the only choice. Listing your home for sale immediately after a NOD and informing the lender that you will be pursuing a brief sale halts the foreclosure immediately, until the brief sale approval or rejection is finalized. Contact an experienced real estate agent to start this process.
Significance for Your Credit
Ignoring a NOD is a way to receive your home foreclosed. Fair Isaac Corporation, which created the FICO score version, believes late mortgage payments to be one of the largest factors which bring your credit score . Debtkid.com quotes that a foreclosure will fetch down your credit by roughly 280 points, and a brief sale will require off 75 to 120 points. A foreclosure will stay on your credit report for ten years, and you’ll have a challenging time getting a new home loan for at least three to five years.