When you enter into a mortgage agreement, lenders have stipulations in the loan contract that protect their investment if you ever get behind on making payments. One of these stipulations is the notice of default. This notice serves as a last effort that lenders use to notify their borrowers of their delinquent payments, and that foreclosure may soon follow.
Once you’ve received the notice, it’s important not to panic. You still have time to find a solution and save your home. After receiving the default notice, contact the experienced Kentucky foreclosure defense attorneys at the O’Bryan Law Offices. Our attorneys will work with you to find the best solution for your particular situation.
We understand how stressful an impending foreclosure can be to homeowners and treat every case with care and compassion. To schedule a free consultation with one of our attorneys, contact the O’Bryan Law Offices today at 502-339-0222.
What Is a Notice of Default on a Mortgage Loan?
A notice of default is sent to a borrower by the mortgage lender, notifying them that they have one final chance to make up for overdue mortgage payments before they begin the foreclosure proceedings on the home. Under Federal law, lenders cannot start foreclosure until the mortgage is more than 120 days past due.
This notice is the lender’s way of notifying the borrower that the clock is ticking on their delinquent mortgage, and foreclosure is fast approaching. If the borrower waits too long, their lender may invoke the acceleration clause, which is stress-inducing.
What Is Included in a Notice of Default?
The notice of default is public record, and homeowners will receive a copy of the notice in the mail. The notice may also be posted on the property’s site, depending on the lender. A public notice of default can sometimes be published in the local newspaper or on the county’s website.
The following information will be included in the notice of default:
- Borrower’s name and address
- Name and address of the lender
- Property address and a brief description of the property
- Total amount of debt owed by the borrower
- Deadline to resolve the delinquent debt
- Next steps if the borrower does not settle the debt
What Happens With a Notice of Default?
When a homeowner is behind on their mortgage payment, the lender will send them a notice of default notifying them that they are in breach of the mortgage contract. Lenders don’t usually send out these notices until the borrower has become several months behind. This notice tells the borrower that if something isn’t done to rectify the outstanding balance on the loan, the Kentucky foreclosure process will begin.
How Does a Notice of Default Work for Mortgage Payments?
Once a borrower has received the notice of default, they’re in the pre-foreclosure stage. At this point, your mortgage will be at least three months past due. However, this doesn’t always mean you’ll lose your home. When you’ve received the notice of default, there are still options that you can pursue that can save your home and/or your credit score.
Foreclosure Proceedings and a Notice of Default
A notice of default is NOT a foreclosure notice. However, this notice serves as the lender’s final warning that you’re behind on payments, and the next step is a foreclosure auction. Once you’ve received this notice, it’s essential to act quickly, as your window of opportunity is quickly closing.
The Kentucky foreclosure attorneys at the O’Bryan Law Offices can help you find a solution to your financial troubles and stop the foreclosure action. Contact our law firm immediately following the default notice.
Nonjudicial Foreclosure Process
One type of foreclosure is the nonjudicial foreclosure process. This type of foreclosure is used throughout the United States. During this type of foreclosure proceeding, the lender will report the mortgage default to the county recorder’s office, which is responsible for maintaining records throughout the county.
Following the filing of this notice, the lender will need to meet requirements before moving forward with the foreclosure sale. During this foreclosure process, the lender does NOT have to file a formal lawsuit to file the foreclosure.
A formal lawsuit must be filed to start the foreclosure in states that recognize judicial foreclosures. This is known as judicial foreclosure, and Kentucky is one of the states that use this foreclosure process. You’ll receive an official notice of default, and a court summons during this process. Once you’ve received this notice, you’ll have 20 days to respond to the complaint.
It’s important to take this very seriously and attend the court date. While in court, you can show the judge proof of financial hardship and potentially stop the foreclosure. Our foreclosure attorneys at the O’Bryan Law Offices can help you during this process and ensure you have everything necessary to plead your case.
Stopping a Foreclosure Sale After Notice of Default
When a homeowner receives the notice of default, they’re given a short amount of time to remedy the delinquency. After receiving the notice, you must contact your lender and submit a loss mitigation application. Once you’ve submitted this application, your lender will provide you with options, including:
- Pursuing a short sale
- Arranging a loan modification
- Enacting a deed in lieu of foreclosure
- Seek a forbearance
After the lender has provided options, including those listed above, this period of time is known as the loss mitigation period and is required by federal law. If the homeowner does not submit a loss mitigation application, the lender will begin foreclosure once the loan has been in default for 120 days.
Avoiding Foreclosure and Keeping Your Home
If you do not submit a loss mitigation application, you’ll receive a notice of sale, meaning your property will be sold at a public auction. This notice announces details about the property to the public. The property will then be given to an independent buyer with the highest bid, or the lender can purchase it to resell it. The lender often buys the property back if the bids aren’t high enough.
There’s still time to stop the foreclosure once you’ve received notice of default. The best way to stop the foreclosure sale is to pay the loan in full. Suppose you’re unable to pay the entire balance. In that case, you may be able to negotiate with your lender to refinance your loan or pursue a loan modification if you don’t qualify for a refinance.
Even though the O’Bryan Law Offices do not provide loan modification services, our attorneys can provide guidance on how best to stop foreclosure and keep your home.
Avoiding Foreclosure Without Keeping Your Home
Many homeowners who receive the notice of foreclosure will walk away from their mortgage and sell their home. Under these circumstances, you may wish to pursue a short sale of the property. A short sale is when the property is sold for less than the amount owed on the property. Working with a real estate agent specializing in short sales is important, as it can be complicated.
Another option is executing a deed in lieu of foreclosure, which is the process when a homeowner signs the property back over to the mortgage company. If you’ve walked away from your property, this is a viable option since it keeps you out of the public eye and prevents a foreclosure from affecting your credit.
When homeowners are behind on their mortgage payments, they’re likely behind on making other payments. Another option to help improve your financial situation is to file for bankruptcy. This is a solution for many individuals struggling with debt and looking for a way out. Once you’ve filed your bankruptcy, the automatic stay will take effect, pausing the foreclosure.
Depending on which type of bankruptcy you file, you may be able to avoid losing your home. If our attorneys find that Chapter 7 bankruptcy in Kentucky would be best suited for you, there’s the possibility that you may lose your home during the liquidation. On the other hand, if you can file a Chapter 13 bankruptcy in Kentucky, you may be able to pay off your mortgage debt as part of your repayment plan. Since this bankruptcy process reorganizes your debt and allows you to pay off your debts over three to five years, many homeowners have been able to keep their homes with a Chapter 13.
How Serious Is a Notice of Default?
A notice of default is very serious and is the last effort lenders will make when trying to collect delinquent mortgage payments. Following the notice, borrowers will have a short period of time to decide how to proceed. Whether you plan on trying to keep your home or want to walk away, it’s essential to notify your lender of your decision. In addition to contacting your lender, contacting an experienced Kentucky foreclosure attorney is recommended.
What to Do if You Receive a Notice of Default
While the notice is severe and shouldn’t be ignored, you still don’t need to panic. There are options available that can either help you keep your home or help you move out without damaging your credit.
Once you’ve received the notice, contact the Louisville bankruptcy attorneys at the O’Bryan Law Offices as soon as possible. We’ll evaluate your finances and help you find the best option that can stop foreclosure. If we determine that bankruptcy would be the best course of action, we will begin the bankruptcy process.
Contact O’Bryan Law Offices Today
Receiving a notice of default can be an extremely stressful time, even when you know you’re behind on payments. At the O’Bryan Law Offices, we understand that financial hardships happen and can have a significant impact on your life. When you receive a notice of default, contact our Kentucky bankruptcy attorneys immediately. There’s not much time after you receive the notice to work with, so it’s critical that we begin structuring a plan quickly.
If you’ve received a notice of default, schedule a free consultation with the O’Bryan Law Offices by calling 502-339-0222 today.