Answer:  - This is unfortunate. You like many others have had the same thing happen to them. It’s hard to suggest what to do in this case… all you can do is all you can do. If you can’t afford it, then you can’t afford it. Yes, the lender can a file deficiency judgment against you for the loss, but most homeowners will file bankruptcy which wipes out the judgment. In this case where you have equity in your personal residence, it would be in your best interest to work out something with the bank to avoid the judgment altogether. Make sure when you work out your agreement, you settle on a “satisfaction” of the loan, that way the worst they can do is 1099 you for the amount they lost.

Answer: – Absolutely… I’m sure if you review your paperwork it will tell you that they have the right to foreclose if payments are not made.

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

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

Answer: -Well it depends on your states laws as to how much time you have until you have to vacate your home.  If you live in a trust deed state where the redemption period is before the auction, then you’ll have a few weeks to a month to leave your home.  If you live in a state where foreclosure is filed judicially, typically the redemption period is after the auction so again depending on your states laws and redemption period after foreclosure, it could be a few months up to six months.

The best way to find out how long after foreclosure until you have to be out of your home is to call up a title company and ask them or you can visit your State Laws page and see when you redemption period is.

Is this allowed or legal, can a new servicer attempt to collect on the Heloc since the home has already gone into foreclosure? Should I meet with a lawyer or am I okay ignoring these letters?

Please advise and thanks for your time,

Aaliyah, Gilroy CA

Answer: -This is normal protical and yes since your loan was “sold” to a new servicer, they can try to collect the debt.  So they will send you certified letters in the mail every month telling you how much you owe and that it’s an attemt to collect the debt.  You don’t need to respond unless you are disputing the action and I’m sure they will try to call you every week and threaten you to pay…or else.  By sending these letters, it gives them the right to proceed with foreclosure if they want.  However, we all know they won’t unless there is substancial equity in the property.  More than likely they will just write it off as a loss and 1099 you for the difference.

Answer: -Nomi, the California redemption period is approximately 3 months and begins after you receive the notice of default.  Typically you won’t receive a notice of default until you are at least 3 months behind on your mortgage, especially now, banks are slower issuing the notices of default because they don’t need any more inventory.  So you’re about 6 to 8 months out from foreclosure, if it goes that far, so you do have several options as a homeowner.  Unfortunately Obama’s HAMP program hasn’t turned out the way we had all hoped, however there are alternatives.  Assuming you want to stay in your home, one option is a loan modification. This is something you can do yourself or you can hire an attorney to do it for you…just be careful in choosing the right attorney that really does care about your situation and will guarantee their work. Another option is to sell your home, if it has equity, and move into something smaller or less expensive until things pick up again. If your home does not have equity and a loan modification doesn’t work, you could try to do a short sale where a buyer offers the bank less than what is owed on the property. Whatever you do, don’t give up.

Answer: -When the property goes to foreclosure, everyone is paid based on lien priority.  If you are in 2nd position and the 1st is foreclosing, the opening bid will be the loan amount on the 1st plus a bunch of fees.  The only way you’ll get paid is if someone bids more at the auction than the opening bid.  Anything above the opening bid will go to whoever is next in priority.

Please help. My father’s home recently foreclosed (last week) and our incompetent bankruptcy lawyer did not know it was important to file the bankruptcy prior to the foreclosure which would have cleared any tax consequences or deficiency judgment against him. Since my father has filed bankruptcy AFTER the foreclosure, I understand the lender will either forgive the debt and issue a 1099 to the IRS or seek a deficiency judgment. My question is, if the lender decides to seek a deficiency judgment, will the deficiency amount be discharged in the bankruptcy – although he filed the bankruptcy after the foreclosure? Please advise. Thanks!

Answer: -More than likely you won’t even have to worry about the deficiency judgment because most lenders don’t file a deficiency judgment against homeowners.  It is much more common for them to issue a 1099.  But yes, if by chance they did file a judgment against him, filing bankruptcy after foreclosure shouldn’t matter.  In fact, most homeowners will file bankruptcy after they are hit with the deficiency judgment so it will be wiped out.