Mortgage Default

• A mortgage default occurs when a borrower stops making payments on a mortgage in the long term. For just a single monthly payment, there is a grace period and potential fees for missing the deadline. However, after several months have gone by, the lender is likely to move the mortgage into default status. This coincides with a move to foreclose on the property in most cases, since lenders want to get as much of their money back as possible through the collateral.
  
  

Bank Contract

• While the mortgage contract rarely lists any collateral except for the property that the mortgage was actually used to purchased, this does not always mean that the lender can only seize this property. In many cases, borrowers have a mortgage and a savings account with the same bank. In this case, banks may have a clause in their account contracts that allows them to take funds from an account to pay for a late mortgage.
  
  

Judgment Lien

• If borrowers do not have any accounts with their mortgage lender, it is much less likely that the lender will be able to seize funds from an account directly. An exception may occur with a judgment lien, where the foreclosure does not cover all the debt that the borrower owes and the lender sues for the rest of the money owed. In this case a court order may allow for seizure of assets from a bank account. However, many foreclosures may forgive this extra debt or count it as a loss or settled.
  
  

Bankruptcy

• One of the primary effects of a bankruptcy is to stay all other legal actions against a debtor. This means that if a borrower who has a defaulted mortgage files for bankruptcy, the lender cannot complete a foreclosure process, let alone access funds kept in a bank account, until the bankruptcy has been completed. This can be a useful way of protecting assets for a borrower who has multiple debts he is unable to repay.