What happens if I cannot pay my mortgage?

Based on the terms in the mortgage contract, the lender can do a statutory or judicial foreclosure  if the homeowner fails to make payments on the mortgage. A statutory foreclosure can be done without bringing any court action against the homeowner. The lender does have to follow very strict state regulations as to the proper notices and opportunities to the homeowner to make payments before a sale of the property occurs. This procedure is relatively fast.

If a judicial foreclosure action is warranted, the lender has to file a complaint with the court and go through the litigation process to obtain the right to foreclose on the property. In several state jurisdictions, the homeowner is allowed the right to stay in possession of the home until the foreclosure process is finalized or a sale of the home occurs.Some lenders prefer to avoid the cost of foreclosure so they are sometimes willing to come to an agreement with the homeowner.

They may accept "interest only" payments or partial payments for a while in order to assist the homeowner. There are detailed regulations regarding foreclosure procedures so it’s best to consult with an attorney if a foreclosure proceeding endangers your home.

If you are not able to pay to pay the default amount, the title of your property is then transferred to the lender who will then resell the property to recoup the loan. If the lender is not able to get the full amount of the loan they can sue the homeowner in order to recover the difference. If they are deemed successful, your wages can be garnished or other assets seized in order to pay the deficient amount. Some States however, does not allow the lender to take such action.

Homestead exemption is a law typically designed to protect the value of the homes of residents from property taxes, creditors, and circumstances arising from the death of the homeowner’s spouse. The exemption may protect some or all of your interest in the house and the adjoining land that you occupy as a home. The amount of the homestead exemption that is available is set by state statute; creditors may not be able to force the sale of homestead property.  A homestead is the primary residence of a person and no other exemption can be claimed on any other property anywhere, even outside the boundaries of the jurisdiction where the exemption is claimed.

Some States provide different levels of protection under their homestead exemption laws. Some will only protect property up to a certain value, and if a home is worth more than that, the creditor can still force the sale of the home, but the owner can keep a certain amount of the proceeds of the sale.

Some homeowners attempt to use creditor exemption laws provided by the state in which live, but goes about it in a way which does not always obtain the desired exemption. As a result, they expose assets to more liabilities than anticipated, and may receive no or less protection from third party claims than could otherwise be obtained. Obtaining competent legal counsel will result in greater protection of assets with less exposure to liabilities and headaches, as well as provide flexible estate planning