Can a Lender Seize My Salary if I Don't Pay Home Mortgage

During tough economic times, getting a home mortgage can be difficult. Economic shifts and challenges frequently change the requirements for obtaining a mortgage to pay for that dream home. Despite what the state of the economy is, it is possible to get a home mortgage.

What Happens if You Don’t Pay your Home Mortgage?

Homeowners who get a mortgage loan are legally subjected to pay back the lender according to the terms and conditions of the mortgage agreement. In case you don’t pay your mortgage as settled, you may worry that your mortgage lender will garnish your salary to recover your mortgage loan. Stopping the payment of mortgages can lead to serious penalties and your mortgage lender will usually choose foreclosure on your mortgage and sell your property rather than garnish your wages. If the lender’s sale price is not sufficient to pay your mortgage loan and the lender’s foreclosure cost, then the lender might probably take your salary to recover the loss.

Read on to educate yourself about the consequences of not making a mortgage payment.

Default

Any homeowner who fails to make home mortgage payment on time is technically in default. Mortgage lenders may begin to process the default within one business day of the due date; however, several lenders don't pursue default mortgages that quickly. Lenders usually extend a grace period of 15 days to receive payment. After noticing that the mortgage is in default, the lender will file a Notice of Default with the county recorder and will mail a Notice of Default to the borrower within 10 days.

Time Frame

The amount of time a lender will wait before filling a Notice of Default or initiating the foreclosure process will depend upon the economic climate. According to the data from LPS Applied Analytics mentioned in “The New York Times", June 2010, “the average homeowner facing foreclosure was more than 400 days beyond the first missed payment”. While in some cases a foreclosure may be complete within six months of the first missed payment. It may take decades to overcome the financial challenge after a foreclosure or bankruptcy. Even a single event can affect your credit rating, making it difficult to get a home loan, rent property or receive a credit card.

Deficiency Judgment

After opting for a foreclosure, your mortgage lender may attempt to collect the deficiency balance against you. If you are unable to pay the balance, the lender will probably file a civil lawsuit against you. Consequently, the court will give you an opportunity to argue the lawsuit, either in writing or at a hearing. If you are unsuccessful in challenging the lawsuit, the court order will go in the favor the lender.

Summons of Garnishment

Once the court will go in the favor of lender and make you responsible for the deficiency balance, the lender may apply to the court to issue writ of garnishment. The writ of garnishment will allow the lender to order your employer to hold back a portion of your salary to apply to the deficiency. After verifying your employment documents, your employer will begin sending garnishable amounts to the court or the lender.

However, a mortgage lender will probably pursue a deficiency judgment and wage garnishment. But, this practice is prohibited in some states; for instance in California, deficiency judgments for non-judicial foreclosures are prohibited. At the end of the day, it is highly recommended that every homeowner should make mortgage payments on time so that they are not subjected to penalties or other inconveniences.