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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