July 13, 2024


Mad about real estate

Learn the Difference Between Mortgage Default and Default Judgment In Foreclosure

When banks foreclose on a home, the owners are commonly puzzled by the language used in the numerous legal documents. One of the terms that causes the most perplexity is’default.’ There are at least 2 other ways that this word is utilized during the foreclosure process, neither of which have good implications for the borrowers almost all of the time. However homeowners should know the way the word will be utilised by the bank.

The first way that banks use the word’default’ is when they allege the owners are in default of the mortgage contract. The borrowers sign the mortgage, cash advance or deed of trust to establish the terms in which they will make payments to the lender or servicing company to keep the contract prepared. Once payments are missed, the payment terms of the contract have been breached and the homeowners are in default.

So a default of a mortgage contract means that the owners have not managed to meet one of the conditions for holding up their end of the contract. While there are more ways to fall into default of a loan, the commonest breach of the contract is when borrowers fail to make payments on time and the lender starts the foreclosure process. In the lawsuit paperwork, the bank claims the owners are in default.

The second way that banks use the word’default’ is when they file a motion with the court during the foreclosure. This motion might be called an order of default, motion for default judgment, or some other similar term. For the needs of this article, the motion will be referred to as an’order of default.’ however homeowners should remember that the same sort of legal document can have a different name in their state.

An order of default means the bank is making an attempt to get a judgment against the homeowners for foreclosure without needing to go through a trial or other court techniques. Naturally, this cannot be done just below any circumstances, but it is typically done in foreclosure cases because of the ignorant nature of most borrowers. The bank can begin some steps of the process and then get a judgment without having to prove its case.

This is generally done when homeowners do not show up at a preliminary foreclosure hearing or file an answer to the lender’s complaint. The borrowers’ silence is taken by the courts to mean that they don’t have any objection or argument with the bank’s allegations of breaching the mortgage contract, nor do they challenge the lender’s ability to bring a foreclosure because of bad credit loans into court in the 1st place.

So, if the house owners did not file an answer to the legal action or show up or request a hearing on the problem, then the bank will request that an order of default judgment be entered by the court. Most courts will have small problem entering this order, as they figure the homeowners were given sufficient time in which to hire a counsel, obtain a law degree, or learn the court procedures competently enough to file a solution.

An order of default isn’t the end of the line as householders can try to have the default judgment left or dismissed. This requires that they file the suitable motions in court in time. If the order to leave the default judgment is granted, the bank will have to follow the legal action more carefully. It won’t be able to depend on house owner ignorance of the process in order to have the home sold at a policeman sale.

It is a little tragedy that most foreclosure cases are decided by default judgment. This is due to so many borrowers not filing an answer or showing up to foreclosure hearings. Thus, it is important for more borrowers to teach themselves on at least a few simple steps they can take to make it much harder for the bank to declare them in default of the contact and then get a default judgment against them.