Defaulting on Your Mortgage

Your mortgage contract will clearly outline the consequences should you default on your loan. Default is usually associated with failure to make your mortgage payments. While this is the most frequent cause of default, other common causes include:

• Failure to pay property taxes;
• Failure to insure or sufficiently insure the property;
• Failure to obey local, state or federal law as it relates to the premises;
• Deliberately damaging the property that secures the mortgage; and
• Leaving the property vacant for an extended period of time (i.e. abandonment).

If you encounter financial difficulty and cannot make your mortgage payments, speak to your lender immediately. If this is a short-term situation (perhaps due to illness or cash-flow problems), some lenders may waive payments for a short period or allow you to make partial payments. Alternatively, the lender may suggest that you defer the debt and make new payment arrangements. This usually will entail lengthening your mortgage by the number of months you were unable to make the full payments.

If these solutions are inappropriate or unacceptable to the lender, seek the advice of your lawyer immediately. Other options may be available to you, such as selling the property to pay off the mortgage loan and any outstanding payments. In addition, if you have a residential mortgage, contact the City of Chicago’s Home Ownership Preservation Program by phoning 311.