There are many common causes of foreclosure. Nonpayment typically is the primary reason why property is foreclosed upon. When I’m representing a buyer of a piece of property, typically I will go through the loan documents with them and point out the default sections. We have some very standard residential forms that we see time and time again in these kinds of transactions.
One of the provisions that I point out is that there is often a 15-day grace period, but it’s not really a grace period. It is 15 days before a late charge is imposed. This is a very typical provision in a loan document or promissory note.
Technically, you are in default the day after the payment is due, under these documents. People mistakenly think, “Well, I’ve got 15 days.” Often that’s not what the loan documents say. It says: If you don’t pay on this day, you’re in default. We’re just not going to penalize you until the fifteenth day.
Practically, do banks foreclose on you for one day late? No. The banks, having gone through the 2008 collapse, and having gotten a lot of property in their portfolios that they really didn’t want to have, have gotten a more and more realistic view of working with a debtor.
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