Articles
Newsletter
| Credit Coaching - What About the Foreclosure Debt? |
 |
 |
 |
| Written by Cliff Pape |
| Wednesday, 25 March 2009 09:52 |
|
There are few words which are more feared by homeowners than "deficiency judgment". This means that not only are they in imminent peril of losing their home, but that they may also have to pay the amount of the deficiency judgment to their lender. Even worse than this, many fear the lender may pursue their other assets in the interest of recovering the money owed to them. If a foreclosure has already happened, then the homeowner is generally not sued to collect a deficiency judgment. This depends on a lot of different factors and it can be a very complicated issue; mortgages and foreclosures can be structured in many different ways, each of which has a different implication for the handling of any debts owed by the homeowner. The deficiency judgment is the amount remaining towards your total balance of your mortgage loan amount, minus the amount that the lender received from the foreclosure sale of the home. Each state has its own laws governing deficiency judgments. Be sure to check with your state to see if it is an anti deficiency state (no deficiency judgment is placed). If your state does not allow for deficiency judgments, then there usually is no reason to worry about having something repossessed or having your wages garnished. So, what if there is a deficiency judgment placed upon that homeowner? Will the homeowner really owe the mortgage and judgment? Remember that the lender is trying to collect on a debt that is secured by real estate. If you have not yet built up any equity by the time your home is sold in a foreclosure sale, the mortgage holder will receive less money than what you owe to them. They may then choose to go for a judgment or issue a 1099 against you. Even if the lender buys the property at the foreclosure sale and sells it later on for a lower price than what you owe, they may pursue a judgment. The money raised through a foreclosure sale is used to pay off liens on the title to your home; just because the home has been sold does not necessarily mean that your debts will be covered. You already have a debt to the lender (the mortgage). The lender is merely attempting to recover the money which you have defaulted on paying. A deficiency judgment indicates that a court has decided that your mortgage lender is owed a specific debt by you and that you have not paid this debt. Since a foreclosure does not typically happen when the homeowner has the ability to keep up with their payments, lenders are not usually interested in seeking a deficiency judgment. They know that you are unlikely to be able to pay, whether or not they receive this judgment; it may in fact cause them to lose money if they decide to pursue the matter. Generally speaking, they will instead write off the loss, since it is more profitable for them to deal with other matters. In most cases, homeowners will not actually be sued for a deficiency judgment following a foreclosure, even if they live in a state where this is permitted by law. However, it should be remembered that this is an option which lenders do have in many states, so be aware of the possibility; it may be a good idea to get some legal advice just in case. Note: Just as with any other sort of judgment, a deficiency judgment will be reflected on the homeowner's credit report. About the Author: Home Buddies is a real estate investor credit repair coach. Starting with their free session for website visitors, Home Buddies develops and implements a customized strategy to improve credit and creates a business development strategy to help real estate investors or homeowners overcome problems to financing properties and building their portfolio. Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
Stumble It!
Members : 1254
Content : 2297
Web Links : 1
Content View Hits : 309369
Content : 2297
Web Links : 1
Content View Hits : 309369