Is a Charged-Off Mortgage Still a Lien?

A mortgage charge-off is a serious delinquency.

A mortgage charge-off is a serious delinquency.

A mortgage charge-off is a term that lenders use merely to categorize a debt. For a mortgage to be "charged off," it generally needs to be deemed a "bad debt" and is sometimes sold to a third-party collection agency. A mortgage charge-off is somewhat rare, but it is possible, and even if a mortgage is charged off, it will remain a lien on the home. Since the loan was secured initially with the home, failure to pay puts the home at risk.

Mortgage Charge-Off

A mortgage charge-off on a credit report will remain a lien on the title to a home. Most mortgages, however, are not charged off. In general, if you fail to pay on your mortgage, your mortgage lender (bank or loan company) will institute foreclosure proceedings (either judicially or non-judicially, depending on your state) to begin the process of reclaiming your property for resale. However, in some cases, particularly if it is a second mortgage, your loan may be sold to a third-party collection agency.

How Liens Work

A lien is a legal tool that creditors, lenders and businesses use to force delinquent borrowers into paying. Most liens on properties are not for this purpose, however. Rather, most liens are agreed-upon mortgages and equity loans that customers are using to finance their homes. These liens exist merely as security for the lender. However, if you fail to pay (on anything from a small credit account to a large medical bill), the creditor can use a legal process to acquire the right to put a lien on your home.

Why a Mortgage Remains a Lien

In some cases, a credit card charge-off will not become a lien on a property. It is important to remember that the term "charge-off" merely relates to the categorization of a debt. A credit card charge-off is the same as a mortgage charge-off in that they are both deemed "bad debts." It is up to the discretion of the collection agency whether or not to take legal action on a delinquent debt. However, since a mortgage is already a lien on the property, the collection agency charged with recovering the debt will not remove the lien or surrender its most coercive collection method (right to property). In short, for the lien to be removed, a mortgage must be repaid or the house must be surrendered.


Your only option if your mortgage has been charged off is to negotiate with the lender or the collection agency now handling the debt. It is possible to find a new payment plan that is more reasonable and financially suitable to your new situation. However, again, negotiation will likely never get the lien removed from the home until the loan is repaid in full, or repaid according to the terms of a new repayment scheme worked out with the collection agency.

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