A mortgage and the intervening terminology involved can be difficult to understand. We wanted to highlight a few terms that tend to pop up when people are considering bankruptcy or are already in an active bankruptcy. Learn all you can about your mortgage lender and develop a mutual relationship so that if unforeseen circumstances do arise, they will graciously assist you.
Default—failure to meet the legal obligation of monthly payments on a mortgage. Defaults are translated as arrears to be paid back in a chapter 13 mortgage. The missed amount of payments can be put into the chapter 13 bankruptcy to cure defaults.
Deferment—temporarily pausing your monthly loan payment, although interest is still accruing. The deferred mortgage payments are typically added on to the end of the mortgage loan, not the end of the deferment period.
Delinquency—failure to make payments on time; can lead to foreclosure
Escrow—account held by the lender into which the home buyer pays money for tax or insurance payouts
Forbearance—pausing/suspending or reducing your mortgage payments for a set period of time. You will be required to repay any missed or reduced payments, likely over a period of time. This is a temporary solution if you can’t pay your mortgage due to a circumstantial hardship.
Foreclosure—the lender or seller forces sale of the mortgaged property because the borrower has not met the terms of the mortgage; the property is then seized and sold to recover the loss
Lien—claim upon a piece of property for the satisfaction of a debt or obligation. Creditors can secure a lien on your real estate for the debt that is owed to them.
Modification—Agreement to permanently change one or more of the terms of the mortgage contract to make the payments more manageable; can include reducing the interest rate, adding missed payments to the remaining balance of the loan, or extending the term of the loan.
Refinance—procuring a new mortgage loan on a property already owned, often replacing existing loans on the property
Short Sale—initiated by the homeowner to get out of a mortgage and avoid the foreclosure process; typically happens when there are multiple missed payments or owing more than the home is worth. Selling the home for less than it is worth and you may still be on the hook for the deficiency balance
Call Now for a Free Strategy Session from a MN Bankruptcy Lawyer from Kain & Scott
A bankruptcy can be a stressful decision to make—don’t let that get in the way of protecting and understanding your mortgage. Set up a free consultation via www.kainscott.com today to discuss your bankruptcy and mortgage questions!
