Having a merry heart will do good like medicine.

This post may contain affiliate links. Read my disclosure policy here.

Imminent Default: What It Is and How to Deal With It

When it comes to mortgage payments, imminent default is a serious concern. But what exactly does it mean? Imminent default occurs when the servicer (the company responsible for collecting mortgage payments) becomes aware that a borrower (the person who signed for the loan) will be unable to make their mortgage payment within the next 90 days.

It’s important to note that the servicer will not reach out to a borrower for a workout plan unless the borrower is more than 30 days behind on their mortgage payment. So, if you’re currently having a hard time making your mortgage payments but are still current, it’s up to you to reach out to your servicer for help.

Different options are available for dealing with imminent default, depending on the borrower’s situation. Here, we’ll take a look at the options for conventional mortgage loan modifications and conventional mortgage short sales or deeds-in-lieu.

Conventional Mortgage Loan Modifications:

• The mortgage loan must be current or less than 60 days delinquent at the time the bank considers a modification.
• The property must be the borrower’s primary residence.
• The borrower must submit a completed Borrower Response Package (BRP), which includes a mortgage assistance application, non-borrower application, non-taxable income, and other forms (such as Form 4506-T/4506T-EZ if the borrower is self-employed and unable to provide the documentation required in the mortgage loan application).
• The borrower’s non-retirement cash reserves must be less than $25,000.
• The borrower must have a hardship, such as the death of a borrower, divorce, long-term or permanent disability, or separation of borrowers who are not married.
• Another hardship for a loan modification may be an increased monthly principal and interest payment that occurred as a result of an interest rate adjustment within the last 12 months for a mortgage loan that was previously modified with a step-rate feature.
• The servicer must determine either credit or hardship eligibility.

Conventional Mortgage Short Sales or Deeds-in-Lieu:

• The mortgage loan must be current or less than 60 days delinquent at the time the bank considers a short sale or deed-in-lieu.
• The property must be the borrower’s primary residence.
• The borrower must submit a completed Borrower Response Package (BRP).
• The borrower’s non-retirement cash reserves must be less than $25,000 (with the exception of service members who receive Permanent Change of Station (PCS) orders to transfer their employment location greater than 50 miles one way to work).
• The borrower has a hardship. (If you have to move for employment could be a hardship). Also, look at the examples in the modification part.
• The borrower must be experiencing a hardship, such as job loss, a significant amount of medical expenses, or a disability.

Currently Reading:

Hey, ya’ll! Quick update on what I am reading currently. Killing Lincoln: The Shocking Assassination That Changed America Forever.

I am listening to this on the Libby App for free! Check it out.

Also, I just got done reading Book Girl and I had a hard time putting his book down it was really good! Really good information about different books and authors to read. Made me think outside of the box!

* In my upcoming book Big Banks Small Thinking, I go into detail about loan modifications and short sales 🙂 My book is now published here!

Comments: Have questions on how imminent default works for your mortgage, I’d like to hear them! Comment below or contact me directly!