Deficiency Judgment
Foreclosure Of Home After Divorce And the Possibility Of A Deficiency Judgment
As if going through a divorce isn’t bad enough, if your former spouse kept the home but your name was still on the mortgage for the home, you run the risk that if the home goes into foreclosure, your credit history will be ruined, your credit score will tank and the lender may come after you for any amount owed on the debt. When you get divorced, you should make sure that any ties to your prior home are broken. You should make sure if you transfer ownership of your former home to your former spouse that you also have your former spouse obtain a new mortgage on the home. The former spouse should refinance the home and at that time, you can quit claim the ownership of the home to your former spouse. A clean break with a former spouse will avoid lingering issues after the divorce.
Foreclosure or Short Sale: Which Is Better And Can The Lender Get A Deficiency Judgment?
Foreclosure or Short Sale? Which is better for the homeowner and the lender? A homeowner is underwater on her rental property mortgage and wonders if her lender will come after her for the deficiency if she walks away from her rental property mortgage. Lenders are processing so many foreclosures and short sales right now, that it’s not likely a lender will spend the money to come after her for the deficiency. Most lenders would also prefer to have the borrower sell the home in a short sale rather than go through the hassle of a foreclosure. The lender can usually get more money through a short sale than they can by putting the homeowner through a foreclosure.
Can’t Pay Mortgage? Homeowner Worries About Deficiency Judgment
What happens if you can’t pay your mortgage? A homeowner worries about getting a deficiency judgment if her rental property falls into foreclosure because she can’t pay the mortgage. Some states allow deficiency judgments on primary residences, but many do not. If your house is in foreclosure because you can’t pay your mortgage, you’ll want to make sure that the lender in your foreclosure can’t come after you for a deficiency judgment. In some circles, when a lender can’t go after the borrower for the debt, the debt is called a non-recourse loan.
Anti-Deficiency Law May Protect Homeowner
While anti-deficiency laws will protect a homeowner in some cases, the vast majority of Americans have recently obtained two mortgage loans in the purchase of homes, often referred to as a “piggy-back mortgage.” If the first mortgage loan is foreclosed and the amount of the sale is enough to only pay off the first lender, the second lender will be entitled to sue the owner for the value of its loan. Many anti-deficiency laws won’t protect the homeowner for amount owed on the second mortgage.
