Those that FORCLOSE on their homes do they still owe? (loan, real estate)

[HSCCS]

I know a few people that are forclosing on their homes because of this economy and the realestate crash. I hear that those that FORCLOSE will still owe the bank the difference between what the bank sells the home for and what was originally owed on the mortgage? IS THIS TRUE?

[RoaminRed]

Originally Posted by HSCCS

I know a few people that are forclosing on their homes because of this economy and the realestate crash. I hear that those that FORCLOSE will still owe the bank the difference between what the bank sells the home for and what was originally owed on the mortgage? IS THIS TRUE?

Why shouldn't they owe it? Nobody forced their hand to sign that contract, so they shouldn't get a freebie. Refinancing, maybe. Get out of jail free card, hell no.

[Dd714]

Originally Posted by HSCCS

I know a few people that are forclosing on their homes because of this economy and the realestate crash. I hear that those that FORCLOSE will still owe the bank the difference between what the bank sells the home for and what was originally owed on the mortgage? IS THIS TRUE?

Yes it's true, you are required to pay off what you borrowed. Is that a suprise to you?

Read this for more info including some options:

http://www.city-data.com/forum/busin...can-t-get.html

[car54]

BTW, it is the lender that forecloses, not the borrower!

[michael krotchie]

Congress passed a Mortgage Forgiveness Act in December 2007 that provides relief to people who are upside-down and who sell their home.

OpenCongress - H.R.3648 Mortgage Forgiveness Debt Relief Act of 2007

Brief synopsis:

The current tax code requires a lender who forgives debt to provide a Form 1099 to the IRS stating the amount the borrower has been forgiven. This disclosure applies whether it is a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of their debt. If the property is sold at foreclosure or is sold for less than was borrowed, that difference is considered income and is subject to the tax.

H.R. 3648 would ensure that any amount forgiven on mortgage debt secured by a principal residence will not be taxed. The legislation has a provision to safeguard against abuses. That provision is similar to one that already exists for commercial real estate owners and would treat commercial and residential property equally.

[TimtheGuy]

Originally Posted by HSCCS

I know a few people that are forclosing on their homes because of this economy and the realestate crash. I hear that those that FORCLOSE will still owe the bank the difference between what the bank sells the home for and what was originally owed on the mortgage? IS THIS TRUE?

No, I don't think that is true (at least here in MN). According to my lawyer buddy, if the lender does foreclosure by advertisemnt, which is how they do 99% of them here, then the lender can take the house only and not go after the borrowers for anything else.

[marmac]

but, in MN-----if the foreclosure is in the paper (legal notice) it is auctioned off at the courthouse. The legal notice lists original amount of the loan and how much is owed the bank.

The bank does submit a bid for the amount owed (it can not submit a bid for more than the amount owed)

If----there is a higher bid, naturally you will not be billed by the bank cuz the bank recovered the amount owed.
if there is no other bid (meaning no bid higher than amount owed) the bank now owns your house and they will try to sell it for whatever they can get privately.

A banker friend said they can go after the borrower for the difference. (I call him a "friend" as a casual term cuz I wouldn't put it past him to lie)