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Homeowner Affordability and Stability Program & Making Home Affordable  Including Second Mortgage Modifications

Imminent Default Loans
  

   
Taylor McKenzie, 6-1-09
 
What is Imminent Default?

I get asked “What is Imminent Default?” quite a bit in relation to mortgages and home loans, so I thought I’d explain this in a little more detail.

If you break down the two words in a basic sense, “imminent” means: likely to occur at any moment, impending, near, at hand, about to happen.

The word “default” means: failure to act, inaction or neglect, failure to meet financial obligations, to fail in fulfilling or satisfying an engagement, claim or obligation, failure to account properly for money in one’s care.

So, what this term boils down to is: Borrowers in jeopardy of “imminent default” cannot continue to make full monthly contractual loan payments.

Are you in danger of Imminent Default?

If you are having a hard time keeping up with your monthly mortgage payment, then yes, you are in danger of imminent default.

Most lenders are taking a proactive approach to these types of borrowers. Lenders would much rather figure out a way for you to keep your home if at all possible, rather than foreclose on it.

If this sounds like your situation, you should contact your lender the very first month you cannot make your mortgage payment.

What will the lender require if you’re at risk of imminent default?

You will be asked to provide financial and other supporting information to determine default avoidance and/or possible loss mitigation options.

If you qualify, the lender will negotiate payments and determine the optimal workout solution and as applicable, work with other departments or vendors to document and implement the workout solution, which may include temporary or permanent modification of loan terms.

Will modified loan terms affect your credit?

Normally, as long as you “pay as agreed” to the new terms, your credit should not be affected.

I would however, question the lender as to whether or not they are going to report the account as being late if the workout solution is temporary. Because you are not paying what was originally “contractually agreed to”, this may affect how updates are made to the credit bureaus.

Make sure to get any arrangement in writing, including how the modification will be reported to the credit bureaus so if you run into issues later; you have documentation to dispute any mis-reported information.

 

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