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Except for Az and Ca (and when owners file bankruptcy), the banks are able to file a 'deficiency judgment' against owners in a forclosure action --- and collect the difference between the mortgage balance and the foreclosure sale price.
Is this the second wave of bad news following the nationwide forclosure crisis ... or are the banks simply settling for whatever they can get?
Chapter 13 ends the banks hold on the consumer. Boo hoo for the big banks.
Yeah but most of the freeloaders who do "strategic default" have assets (or think they have assets) so they shouldn't do chapter 13 because they would have to unload some of their valuable assets.
Look at the stupid NJ housewives. She's going through BK (I think). And they flaunted all this stuff (jewelers, art on TV). And the judge found out they have some valuable stuff and they had to sell it at auction.
Of course, most people doing strategic defaults don't have any money at all. That's why they "walk away"
Well I dont watch reality trash and its sad that losers like that act like their situation matters to some Americans.
strategic default, not hearing of that in every state, I know of a man who has his elderly parents at home, cant afford a nursing home at 6k per month and their insurance wont cover it. He lost his 17 year mid-management job at Citi due to outsourcing, is not a freeloader or idiot on reality tv. He is a real person.
It seems reality tv is a nice tool for the right, diversionary trash while real Americans are having problems that need REAL solutions.
Alaska (AK)
Arizona (AZ)
California (CA)
Connecticut (CT)
Florida (FL)
Idaho (ID)
Minnesota (MN)
North Carolina (NC)
North Dakota (ND)
Oregon (OR)
Texas (TX)
Utah (UT)
Washington State
Many loans themselves are non recourse.
I imagine the bank knows that you can't squeeze blood out of a rock....
I too have seen this list posted all over the internet, but it is not accurate. I don't know about the other states on that list, but I can tell you for a fact that Idaho, which is on that list, is a recourse state. I was told that by an experienced real estate attorney this week.
We were also told by Bank of America last week (which prompted the call to our real estate lawyer this week) that the only states that they don't go for deficiency judgments in are California and Arizona, because they are the only non-recourse states.
I too have seen this list posted all over the internet, but it is not accurate. I don't know about the other states on that list, but I can tell you for a fact that Idaho, which is on that list, is a recourse state. I was told that by an experienced real estate attorney this week.
We were also told by Bank of America last week (which prompted the call to our real estate lawyer this week) that the only states that they don't go for deficiency judgments in are California and Arizona, because they are the only non-recourse states.
The list does not explain the requirments just if a, or if not a state with some non recourse regulations. Kinda like those list that show states with no income taxes on retirement pensions but don't list the details that explain its only on very specific retirment pensions, or you have to meet this or that rule, and all other are not exempt.
My state is Judicial - the Lenders have to go through many steps before a house is foreclosure upon. A judicial foreclosure allows the lender pursue a lawsuit calling the entire note due and requesting a court ordered sale of the property to satisfy the note. Ultimately it is determined in court when the home is actually sold. When a judicial foreclosure permits the calling of the mortgage, foreclosing on the home may not be enough to satisfy the total amount due. The lender can file a deficiency judgment against the borrower. A deficiency judgment demands, if the lender does not receive all amounts due them from foreclosure sale of the property, the remaining balance of the debt should be paid by the borrower.
When a judicial foreclosure permits the calling of the mortgage, foreclosing on the home may not be enough to satisfy the total amount due. The lender can file a deficiency judgment against the borrower. In reality Banks are in business to maximize profit out of their indentures. If it is going to cost a bank more to do something, where there is less of a return, (thinking in a business sense), they are going to chose the cheapest way out.
Me personally in the last three years - speaking to thousands of individuals about their financial situation, remember speaking to only one (1) that was foreclosed upon a couple of years before. He received a notice that there was going to be a sheriff sale on his personal property in his new home to satisfy a decency judgment.. I know they do exist, but it is my personal opinion it is an option banks do not do due to the cost involved. Anyone that understands business, should understand how banks work.
In a non-judicial states with a foreclosure, the process is usually handled by a trustee appointed by the bank. This process allows the lender to re-take the property without getting any other further compensation from the borrower. What people fail to understand - the mortgage lender your mortgage debt and will receive a 1099 telling the IRS that you have imputed income for the amount of debt reduction. The taxable income will be the difference between the property value and the balance owed on the mortgage.
For Lenders debt cancellation is the cheapest way then paying for expensive attorneys and court costs associated with a deficiency judgment. They write off their bad debt on their taxes and send out 1099's to the former homeowners. A few years ago Congress came up with a law to protect people from income tax liability associated with foreclosures. The Mortgage Forgiveness Debt Relief Act of 2007 states that homeowners will not be subject to income tax from release from mortgage liability if and to the extent the mortgage proceeds were used to purchase their primary residence. They have to file form F982
To avoid a decency judgment - this is why people do short sales or deed in lieu of foreclosure. It is negotiated between the lender and the borrower in which the lender voluntarily agrees to accept the sale price of the property and they can no longer afford the property. Once they accept a lower amount to satisfy the loan, the lender agrees to forgo foreclosure. So a borrower is protected against a deficiency judgment.
Honestly guys - when it comes to a Non-Judicial vs a Judicial foreclosure, every situation is different! The rules and requirements of both property and borrower actions will vary by state. By trying to predict the outcome, is like trying to forecast the weather next month.
My $00.02
Last edited by Modification Specialist; 11-04-2010 at 04:10 PM..
To avoid a decency judgment - that is why people do short sales or deed in lieu of foreclosure. It is negotiated between the lender and the borrower in which the lender voluntarily agrees to accept the sale price of the property and they can no longer afford the property. Once they accept a lower amount to satisfy the loan, the lender agrees to forgo foreclosure. So a borrower is protected against a deficiency judgment.
To clarify this, on a short sale, the lender SOMETIMES agrees to waive the deficiency judgment, but sometimes not. As I mentioned, I was told by BofA just last week that they issue a deficiency judgment on every single short sale outside of AZ and CA.
We had it as a term in the contract that the offer was contingent on BofA agreeing to waive the right to a deficiency judgment, and they came back and said with that term of the contract in place, they have to reject the contract.
...As I mentioned, I was told by BofA just last week that they issue a deficiency judgment on every single short sale outside of AZ and CA....
And to further clarify, even in AZ waiver of judgment is not a sure thing with short sales. AZ law only applies specifically to foreclosure sales.
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