Question

Umberto and Tiara, who are married, borrow $110,000 from Sterling Credit Union to buy a home. The loan is a fixed-rate mortgage at 5.25 percent with a thirty-year term, subject to an acceleration clause, and secured by the home, which is their principal residence. When Umberto and Tiara have paid off $10,000 of the mortgage—still owing $100,000—they lose their jobs and stop making payments. Sterling Credit makes numerous attempts to contact the couple, but they do not respond. Meanwhile, the market value of their home has declined to $85,000. After six months, Sterling Credit decides to take steps to recover the unpaid amount of the loan. What are the lender’s options? Which option seems most likely? Why? What are the steps are involved?    

Answer 1

If we go in detail than there are not many options by the lending company to take actions on. Since Sterling Credit Union has lended money they have given to purchase the house and as the couple has stopped making payments from last 6 months and even after trying to contact the couple several times there hasn't been any response from the couple. As we can see the type of loan if Loan Against Property (LAP) as the couple has purchased one house out of it. As it becomes the Secured Loan the Sterling Credit Union can take necessary actions against properrty because the couple might have deposited there sale deed of the property to the financial institution and have mortgage the same prior to processing the case. Legally if the couple has stopped making the payments then the house can go to auction and the Financial Institution can reimburse there money out of it. This options seems most likely because the couple is not making the payments and neither they are responding to the Sterling Credit Union. Legal notice will be issued in the couple name and then further the process of auction will start as the process goes further.