Question: I have a house that is currently going through the short-sell process. I have an approval letter for the first and the second. The second is stating “BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment received and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above.” I live in CA and the second was an home equity line of credit (HELOC). We have already agreed to pay $2500 to the second and they have agreed, but they are still including this language in the short sale approval letter. What rights do they have to sue us later on?
Answer: – It depends on what you agree to as part of the payoff. This is where you need to make sure you ADD to the payoff letter that the $2500 is for “full satisfaction” of the loan. See there are 2 types of payoffs. 1 is a “release of lien” which means you pay the mortgage company $2500 and they retain the right to still come after you for the deficient amount. The other payoff is a “satisfaction” which means “paid in full” – they give up their right to come after you for the deficient amount (which is called a deficiency judgment). All they can do is 1099 you for the amount lost of which you can file form 982 and in most cases claim insolvency and negate the 1099. If it was your personal residence, with Obama’s new laws in place, you may not have to pay anyway. So whatever you do, please please please get the satisfaction. Sometimes if they don’t agree to a satisfaction of loan, you’ll just have to pay a little extra more to get that piece of mind.
We currently live in NC and own a home here and still own one in MI. We bought a home here when my husband’s job was moved here last April. We have been trying to sell our home in MI for 2 years. We bought the home in MI for $450,000 in 2003. We are trying to negotiate a short sale for $300.000.
We stopped making our mortgage payment in MI last July but continued to pay on our equity line. Our first has accepted the short sale with us bringing $3,000 to closing. We owe $83,500 on the equity line we took out in Dec. 03. They are saying we have to bring $25,000 to closing, which we do not have…we have borrowed $7500 from parents because that is the amount we were told they would accept + a note for the rest. Now they are saying they will not accept less than $25,000 + a note for the balance. They are saying they will not sign off on the loan so we can sell the house on a short sale if we do not bring $25,000.
They claim we have the money…it is in our 401K. If we can’t bring it and we end up having to foreclose they say they will sue us for the deficiency. Can they do this? It is not our fault the housing market is so bad in MI. The banks had more to do with that than anyone. They claim NC law is on their side and they will win…is this correct? Our credit has been hit bad already because of the first mortgage not being paid since July 09. Should we consider claiming bankruptcy or can we fight this?
Where do we stand on this?
Unfortunately, they can sue you for the deficient amount. Whether they do or not really depends on the lender. More than likely the lender already wrote the loan off and now you are dealing with a 3rd party collection company who is using everything in to books to get you to pay as much as possible for a settlement and there is not a lot you can do, except hope for a reasonable agent that will listen and work with you. You need to PROVE to them you don’t have the money and that your only option now is the file bankruptcy if they file a judgment. Let them know your attorney has already advised you to file bankruptcy and you are trying to avoid that if at all possible, but you need their cooperation. You need to get them to settle for less. If you can pay, then that’s a different story.
You need to PROVE to them you don’t have the money and that your only option now is the file bankruptcy if they file a judgment……
OK here’s a good one, I have an equity line of credit with WAMU and in June of this year they wrote the debt off. The outstanding loan amount was about $325,000 and they sent the debt to a collection company, Oxford, who said they had the file, but WAMU took it back because they didn’t collect on the debt. Then, after several calls to WAMU and Chase, both of which kept telling me they could not either find the file or couldn’t talk to me once it’s been sent to a collection company, they finally have re-assigned the file back to Oxford and that’s where is stands at this point.
The property is in California and I have a Homestead for $125,000 on this home which I live in. The first mortgage is with a private smaller bank and I’m currently down 4 months with them on payments, and they’ve files an NOD which I received on September 13th 2009; the balance with the 1st is about $390,000 plus the back payments which run about $2,200 per month. The 1st mortgage is down about $8,800 but the NOD was filed for about $10,500; probably due to penalties and such. The 1st lender agreed to allow me to bring in $4,500 and catch up on the rest over time, but then said before they work out anything with me they’ll need to know what the 2nd lender plans on doing; more specifically, the want to know if the 2nd will subordinate to any re-drafting of the 1st Note they might work out with me.
Due to a business gone bad over the past 3 years I owe about $230,000 in credit card debt, have a ridiculous lawsuit pending against me from a family member who has no chance at winner but cost me money to fight, a rental property I’m short selling right now, and one creditor who actually filed a lawsuit and received a judgement for around $12,000. My plan is to BK everything and start fresh so I’m interviewing attorney’s now and will pick one in the next week to represent me and finally get all of these “Monkey’s” off my back.
So now, all of that being said here’s a few questions:
1. What do you think is the best course of action for me to take to keep my home?
2. What’s the best way to avoid a deficiency judgement?
3. Do you think WAMU will definitely send me a 1099 and if so will it be for the $325,000 they’ve written off already?
4. If they’ve already written the debt off do you think my attorney will be able to have them release the lien from my home?
Thanks in advance for your time and have a great day!
Sorry to hear of your situation…I think at this point you are headed in the right direction by seeking the advice of an attorney who knows the California laws and can help you the most. Bankruptcy is definitely an option that will allow you to keep your home and get rid of some of your unsecured debt. The best way to avoid a deficiency judgment is to get the loan satisfied which can be done through a short sale. If they release the lien, they still have the right to come after you for the difference and file that judgment against you. Although a bankruptcy would wipe it out. More than likely they will issue you a 1099 and count that loss as income to you. You’ll need a good accountant to work with you in seeing if you qualify so you don’t have to pay taxes on it at the end of the year. Hopefully things turn out better for you next year.
The first advice I would tell you is not to pay a dime out to your lender(s).!!! If you sign up to do a Loan Modification the program allows for lates and penalties to be forgiven. If you have an upside down mortgage can even reduce some of the principal on the 1st mortgage. On the second mortgage because its a secondary lien on home a modification pending on your scenario can also be reduced greatly. And yes your lender will take the lien off your home once a settlement has been made.
In today’s trying times it is hard to decide what to do financially with the hardships many of us are facing and new solutions are being created in order to solve what American homeowners are currently financially facing. I work for a non-profit organization call Home Solutions of North America and a charter of HS4A which assist homeowners save their home by getting them into an affordable rate and payment. Stops foreclosure even up to the day of the sheriff sale.
I hope this helped you and help give you peace of mind.