When banks foreclose on a home, homeowners are often confused by the language used in the various legal documents. One of the most confusing terms is “default.” There are at least two different ways this word is used during the foreclosure process, neither of which has good implications for borrowers most of the time. However, owners must know how the bank will use the word.

The first way banks use the word “default” is when they claim that homeowners are in default on the mortgage contract. Borrowers sign the mortgage or deed of trust to establish the terms under which they will make payments to the lender or service company to keep the contract in force. Once payments are lost, the payment terms of the contract have been breached and the owners are in default.

So, a breach of a mortgage contract means that the owners have not met one of the conditions to keep their part of the agreement. While there are other ways to default on a loan, the most common default is when borrowers don’t make payments on time and the lender begins the foreclosure process. In the claim paperwork, the lender claims that the owners are in default.

The second way banks use the word “default” is when they file a motion with the court during foreclosure. This motion may be called a default order, a default judgment motion, or some other similar term. For the purposes of this article, the motion will be called “order of default.” However, homeowners should be aware that the same type of legal document may have a different name in their state.

A default order means that the bank is trying to obtain a judgment against the homeowners for foreclosure without having to go through a trial or other legal proceedings. Of course, this cannot be done under any circumstances, but it is often done in foreclosure cases due to the uninformed nature of most borrowers. The bank can begin a few steps in the process and then obtain a judgment without having to prove your case.

This is generally done when homeowners fail to appear at an initial foreclosure hearing or do not file a response to the lender’s complaint. The courts interpret the borrowers’ silence to mean that they have no objection or argument with the bank’s allegations of breach of the mortgage contract, nor do they dispute the ability of the lender to take a foreclosure to court in the first place.

Therefore, if the owners did not file an answer to the lawsuit or did appear or request a hearing on the matter, then the bank will request that the court enter an order of default judgment. Most courts will have little trouble entering this order, as they estimate that homeowners were given enough time to hire an attorney, obtain a law degree, or learn court procedures with sufficient competence to file an answer.

However, a default order is not the end of the line, as homeowners can try to have the default judgment vacated or dismissed. This requires that they file the appropriate motions in court on time. If the order to vacate the default judgment is granted, the bank will have to follow the lawsuit more carefully. You will not be able to depend on the owner’s ignorance of the process for the home to be sold at a sheriff’s sale.

It is a small tragedy that most foreclosure cases are resolved by default. This is because many borrowers do not file an answer or do not appear at foreclosure hearings. Therefore, it is important that more borrowers educate themselves on at least some basic steps they can take to make it much more difficult for the bank to declare them in default of contact and then obtain a default judgment against them.