What Does It Mean to “Default” on a Mortgage Loan?

The terms of the mortgage or deed of trust you signed when getting your home loan usually define what constitutes default.

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If you fail to comply with the terms of the promissory note or mortgage (or deed of trust) you signed when taking out your home loan, you're considered in "default."

The most common default type is falling behind in the required monthly payments. But breaching other terms in the loan contract is also a default.

What Is Mortgage Default?

You'll likely be in default on your mortgage loan if:

  • You fail to make the monthly mortgage payment. In most cases, a foreclosure may begin after you're more than 120 days delinquent on the loan.
  • You don't pay the property taxes, assuming you don't have an escrow account.
  • You don't pay your homeowners' insurance bills (again, assuming you don't have an escrow account for this purpose).
  • You allow the property to deteriorate or commit waste by causing damage that lowers the home's value.
  • You transfer the property's deed to a new owner without the lender's permission. After some kinds of transfers, though, the lender can't accelerate the loan.

What Happens If You Default on Your Mortgage Loan

Once you default on your mortgage loan, the lender can demand that you repay the entire outstanding balance, which is called "accelerating the debt." The lender can foreclose if you don't repay the total loan amount or cure the default.

State law or the terms of your mortgage or deed of trust might give you the right to cure (fix) the default.

Whan Can Foreclosure Start?

Also, under some circumstances, federal law requires the servicer to hold off until you're more than 120 days delinquent on the loan before starting a foreclosure.

The 120-day required delay on initiating a foreclosure also generally applies in the case of a non-monetary breach of the loan contract, like:

  • failing to pay property taxes if they aren't escrowed
  • committing waste, or
  • failing to live in the home if the mortgage contract requires it.

This 120-day preforeclosure period is designed to give you time to explore loss mitigation options, but it's also a good time to cure the default if you can.

How to Cure a Mortgage Loan Default

You can cure a payment default by paying the amount due, plus any allowable costs and fees, by a specific time before a foreclosure sale. The cure amount includes just overdue payments, fees, costs, and interest—not future or accelerated payments. After you cure the default, the foreclosure stops.

The amount of time you'll get to cure a default varies depending on state law and the terms of your loan contract. Also, some states limit how many times you can fix a default.

Sometimes, the mortgage or deed of trust you signed when taking out the loan will require the lender to send you a notice before the loan is accelerated, giving you a chance to cure the default. This notice is called a "breach letter."

Talk to an Attorney

To get information about foreclosure laws in your state and find links to more detailed articles covering state foreclosure procedures, see our Key Aspects of State Foreclosure Law: 50-State Chart.

Consider talking to a foreclosure attorney if you're facing a possible foreclosure because you've defaulted on your home loan.

Also, it's a good idea to contact a HUD-approved housing counselor to discuss ways to avoid a foreclosure, like getting a mortgage modification.

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