Q: My friend has a home he lives in and owns different house in another state that is about to be foreclosed on. The foreclosure happened because after his divorce, his name came off the deed to the property but not off the mortgage. His ex-spouse failed to make the payments. He owes about $290,000 but the property is worth only $200,000.
Can he lose the equity in his primary residence and any money he has in the bank in this foreclosure? How can we find an attorney who can guide us?
A: Your friend’s biggest problem is that he didn’t insist at the time of his divorce that his ex-spouse refinance the property to take his name off of the mortgage.
I don’t know if the foreclosed property is in a non-recourse state. If it is a non-recourse state, then the lender would foreclose on the property and would not be entitled to go after other assets. Otherwise, the lender would have to file for a deficiency judgment.
A deficiency judgment is given to a lender that is owed more than what the lender gets through the sale of the home in foreclosure. In some states, lenders can go after other assets once the home is foreclosed on and the lender is still owed money.
Your friend will need to hire an attorney to make sure that once the property is foreclosed on by the bank, the bank would not have the right to go after him for any other money owed to the bank. Your friend might also want to talk to the divorce attorney that helped him out and get more information. The divorce decree might have provided that the spouse would be solely responsible for the debt on the home. It might turn out that the divorce decree could shield him from any consequences from the foreclosure. But he should check that out with his attorney.
I don’t recommend individual attorneys. However, your friend should contact the local bar association and ask to speak to the head of the real estate committee. That person should be well-versed in real estate matters and can recommend a trusted real estate attorney who can assist with this problem.