This has been a topic covered on this blog before. I’ve heard that something like 70% of people going through foreclosure do not contact a Realtor, attorney or financial adviser to discuss their possible options given the foreclosure. Well, deficiency judgments will become commonplace much like the word foreclosure and short sale have become.
Read the deficiency judgment story in the Wall Street Journal. It’s a wake up call if you are going through foreclosure. I cannot give you legal advice. That said, if you go through foreclosure and you are in a state where the creditor can pursue a deficiency judgment, I think you can count on it that they will do so. That deficiency judgment is valuable to that bank or investor. While they will have written off your loan, they can still make money with the deficiency judgment. Often times, if they don’t want to deal with it, they will sell the debt off to other investors who will pursue you with a vengeance. Expect it. The banks will make pennies on the dollar, but when there could be several hundred billion dollars issued in deficiency judgments, pennies end up being a lot of money – and at that point I believe that would be all profit.
In Minnesota, creditors can pursue you up to 6 years after the sale of your foreclosed home only if it’s a second or third mortgage or a home equity line of credit. The first mortgage gets wiped out in Minnesota in foreclosure as long as the bank pursued you via foreclosure by advertisement. If they pursued you via a judicial foreclosure, then they could get a deficiency judgment based upon the first mortgage.
The kicker will be that millions of these former homeowners will be getting back on their feet in the next 4,5,6 years and they will be blindsided by these deficiency judgments which will trash their credit once again. Just when millions might be coming back in to the housing market with repaired credit, they will be destroyed again – and my guess is they will never buy a house again.
- Has a deficiency judgement been ordered against you? (ksattorneys.wordpress.com)
- What a Hangover! (silverdale-revealed.com)