If you are at risk of foreclosure, you might want to know what the consequences are in the event that it happens to you. The evident and inevitable effect a foreclosure has is the ding on your FICO score as well as the foreclosure stamp on your credit report. This will make it very difficult for you to obtain any credit or even find alternative housing or employment. However, is that all to the negative effects of a foreclosure? Let’s explore deficiency judgments after foreclosure.
Recourse vs Non-Recourse State
In every state, there are different foreclosure laws regarding whether lenders can pursue you for the remaining balance after a foreclosure or not. Check HERE to see if your State is a recourse or non-recourse state.
If you are in a recourse state, then it is possible for your lender to sue you and obtain judgment for the remaining balance owed. If a judgment is entered against you, they may be able to garnish wages and/or seize any non-exempt property you owe. Although not likely, they may even be able to seize your vehicle but this of course depends on the state specific laws. It might be worth it to do a bit of research on the subject.
If you are living in a non-recourse state, the foreclosing lender cannot pursue but you are not off the hook yet!
Any otherlenders (2nd mortgages or even 3rd or 4th) ARE able to pursue you for the remaining balance.
We at seattleshortsaleblog have received numerous requests for help in dealing with subordinate lienholders whom after the home was foreclosed on, is now pursuing the homeowner via threatening judgment, judgment, or the popular strategy, selling off the debt to collection companies.
We feel it is better to pursue a short sale, and get a deficiency waiver prior to closing the sale. Those 10 words on the approval letter, “we hereby release our rights to collect a deficiency judgment” (or verbiage similar) are VERY IMPORTANT and in our opinion, better than hoping the lender will not come after you after foreclosure.
Hope this helps
Peter
Full Article Here: www.seattleshortsaleblog.com
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