Foreclosure University Deficiency Judgment / 1099

Question: What is a Deed in Lieu? Which is better, short sale or deed in lieu? I am in So. California.
MS

Answer: – We explain what a Deed in Lieu of Foreclosure is in our free reports section. With a deed in lieu foreclosure you are giving the home back to the bank. By giving or deeding it back to the bank, the deed is considered full payment of the mortgage loan, so there cannot be a deficiency judgment. However, there are certain restrictions like all junior lien holders must be satisfied and there must be clear title. Although you’ll be avoiding a deficiency judgment, the bank will 1099 you for the deficient amount. This deficient amount is calculated by taking the difference between the fair market value (FMV) and the outstanding debt. As far as credit issues, a deed in lieu of foreclosure shows up as “Acquisition or Abandonment of Secured Property” and is very similar to an actual foreclosure.

A short sale on the other hand has fewer restrictions but is very similar in avoiding a deficiency judgment. You can ask the bank to satisfy the loan so it’s paid in full. You will be 1099 for the deficient amount. And for your credit, a short sale shows up as a “settled debt” which is very similar, however most credit experts believe a short sale is better on your credit report than a foreclosure or deed in lieu of foreclosure. I would have to agree…but it’s not by much. Any way you go, it’s going to be bad on your credit.

Question: If a non-primary residence in NY goes into foreclosure, what determines whether I receive a 1099-C or a deficiency judgment for the bank’s loss?

Answer: -A lot of times it just depends on the lender and the amount that’s deficient.

Question: Just got summons in Arizona for a piece of property that was foreclosed on and sold. The bank is suing us for the deficiency amount. Is there any way to fight this? We think we may have a defense because there was no public report for this property at time of sale.

Answer: – Yes, the bank does have the right to go after the homeowner for the deficient amount after the home has been through foreclosure.

Question: is Michigan an anti-deficiency state?

Question:  I have property in WA, currently it is a rental property since I am in the military and am in NC presently. Being that I cannot come close to renting the house for what I pay in mortgage, I am facing letting the house go. Trying to find out all the ramifications of foreclosure.

Answer:  - Well, the bank will either 1099 you for the difference if they are not able to collect what is owed, or they will file a deficiency judgment against you for the amount they lost. Ideally, you are hoping for a 1099-c because in most cases you can counteract the 1099-c if it’s your primary residence or you are insolvent.