If the mortgage balance on a home is higher than what the house is worth, and you lose your home to foreclosure, can your lender go after you for the difference (between what the bank gets from the sale of your home and what you owe on the home)?
In most states, no. In other states, lenders can be issued a deficiency judgment and go after the borrower, but in today’s housing environment, many lenders choose not to do so. That is because there are so many homes in foreclosure and short sale right now that lenders are just eating their losses. Lenders have already lost money on the mortgage and on the foreclosure, and are reluctant to spend more money going after the borrower for money that they likely won’t have.
Lenders would rather do a short sale with the borrower than to go through foreclosure because lenders lose much more money with foreclosures. Lenders might get 30 to 40 cents on the dollar in a foreclosure but will get 60 to 80 cents on the dollar with a successful short sale. In a short sale, where your lender agrees to let you sell a home for less than what you owe, sometimes the lender will have you agree to repay the amount you are short, so be careful about and pay close attention to the agreement with the lender.
Short sales are also less damaging than a foreclosure on the credit history and credit score of the borrower, because often times, the borrower can stay current on their loan and not miss their mortgage loan payments.
To learn more about foreclosures, visit www.ThinkGlink.com. Nationally-syndicated columnist, bestselling real estate book author and Newstalk 750 WSB radio talk show host Ilyce Glink will be presenting, “How to Profit from Foreclosure,” a seminar for real estate investors and prospective home buyers on a housing market recovery driven by the purchase of foreclosed properties. To learn more about the event, which will be held October 24 at the Renaissance Waverly Hotel in Atlanta, be sure to visit Ilyce Glink‘s Web site.