Default and Distress

Default and distress pages explain what happens when a mortgage stops performing as agreed. This section is about missed payments, escalating account problems, and the consequences that can follow if the loan is not brought back under control.

Start with Delinquency for the earlier warning stage, then read Default, Loss Mitigation, Forbearance, Loan Modification, and Reinstatement to understand the main workout concepts borrowers may encounter before the situation becomes more severe. Then move into Notice of Default, Acceleration Clause, Short Sale, Deed in Lieu of Foreclosure, Foreclosure, Judicial Foreclosure, Nonjudicial Foreclosure, and Deficiency Judgment to understand the escalation path if the loan cannot be cured and the debt still is not fully resolved.

In this section

• Delinquency
  Delinquency means the borrower has fallen behind on required mortgage payments.
• Forbearance
  Forbearance is a temporary agreement that pauses or reduces required mortgage payments for a limited period.
• Loan Modification
  A loan modification is a change to the mortgage terms intended to make the loan more sustainable for the borrower.
• Loss Mitigation
  Loss mitigation is the set of workout efforts aimed at reducing mortgage-default harm for the borrower, servicer, lender, or all three.
• Default
  Default is the borrower's failure to meet mortgage obligations under the loan documents, often after missed payments or another material breach.
• Foreclosure
  Foreclosure is the legal process through which a lender or its representative enforces rights against a property after serious mortgage default.
• Notice of Default
  A notice of default is a formal notice that the mortgage obligations have not been met and that the account is moving deeper into default status.
• Acceleration Clause
  An acceleration clause is the loan provision allowing the lender to declare the full balance due after serious default or other triggering events.
• Short Sale
  A short sale is a sale of the property for less than the amount owed on the mortgage, with lender involvement in how the debt is resolved.
• Deed in Lieu of Foreclosure
  A deed in lieu of foreclosure is a default-resolution arrangement in which the borrower transfers the property interest instead of continuing toward foreclosure.
• Reinstatement
  Reinstatement is the act of curing the default by bringing the mortgage account current according to the amount required.
• Deficiency Judgment
  A deficiency judgment is a judgment for the unpaid debt that may remain after foreclosure or another distressed property disposition.
• Judicial Foreclosure
  Judicial foreclosure is a foreclosure process that proceeds through the court system rather than relying only on a nonjudicial power-of-sale path.
• Nonjudicial Foreclosure
  Nonjudicial foreclosure is a foreclosure process that relies on document-based power-of-sale rights rather than a full court action.