Foreclosure University

Your Online Real Estate Investing Resource

deficiency judgment

My husband bought a condo a few years back. If we dont get a renter soon we will have to foreclose on the condo or short sale it.

by 4 Comments

Question: My husband bought a condo (Interest only loan) a few years back before we got married. It is now worth less then half of its value, therefor we couldnt sell it, and was too small for us to live in it together. We ended up buying a second house together and was planning on renting out our condo. With our bad luck we have not been able to find a renter, so we have been paying on 2 mortgages. It is getting to the point where we can not afford both, and if we don’t get a renter soon we will have to foreclose on the condo or short sale it. My questions are as followed:
1. Will it affect my credit even though I didn’t purchase the condo or sign a contract. Only my husband did?
2. Can the bank go after us if we foreclose or short-sale? Can they take our current home?
3. Will we owe taxes on it and if so is there ways of reducing those or getting around them?
4. My parents co-signed on the new house, can this effect their credit, or can the bank go after them?
5. Lastly my husband has an HOA fee on the condo as well, can they come after us if we stop paying that? Can they garnish our wages.
Thank you for all of you help!!

Answer: –

1. It will only affect the credit of the person who’s name is on the loan, not the title. So in this case, your husband will be the only one who’s credit is affected if the property goes into foreclosure or short sale.

2. The bank can come after you (deficiency judgment) if you foreclosure or short sale…however they typically don’t. More than likely they will just 1099 you for the difference and count it as income. They can’t take your current home unless you pledged it as collateral in order to get the condo which you didn’t since you bought this home after the condo.

3. As for the taxes, yes you will most likely be given a 1099 for the loss which counts as income to you on your taxes. Depending on the situation, you may be able to use IRS form 982 which will counter act the 1099. You will need to discuss this with your accountant. As for property taxes, those will be taken care of either by the bank if they take back the home when it goes through foreclosure or even a short sale.

4. Because these are 2 separate transactions and homes, and was not used as collateral, they cannot do anything to your parents.

5. Yes, they could file a judgment against you as well…but more than likely they won’t.

If the bank sells my house for less than what was owed on it can they come after me for the balance…

by 2 Comments

Question: If the bank sells my house for less than what was owed on it can they come after me for the balance…

Answer: Yes…The bank has 3 options at this point. Either they will do nothing or they will 1099 the homeowner or they will file a deficiency judgment for the amount they lost. In most cases they will 1099 the homeowner and count the loss as income to the homeowner. If you talk to your accountant, sometimes IRS form 982 will counteract the 1099 and you won’t have to pay a huge amount of taxes. They could also file a deficiency judgment against the homeowner and require the debt be paid off. Since most homeowners in this situation can’t pay it off, they file bankruptcy which will get rid of the judgment. There are some things you can do to ensure that a judgment is not filed and that is by doing a short sale. If you have someone who knows what they are doing, they can ask for a satisfaction or to satisfy the loan which means the bank can no longer come after the borrower for the deficient amount. The loan is considered paid in full. Plus with a short sale, the home is sold and foreclosure stays off your credit.

I have a home in WI that is still owned by my ex-husband and myself. It was in foreclosure and he filed bankruptcy.

by Leave a Comment

Question: I have a home in WI that is still owned by my ex-husband and myself. It was in foreclosure and he filed bankruptcy, not sure what is happening now but we had a home equity line on the home, will I be required to pay that back or will the foreclosure take care of it?

Answer: -The bankruptcy will postpone the auction for approximately 2 months, then it will be released and the foreclosure process will pick up where it left off. If no one bids at the auction, the junior lien holders have the option of filing a deficiency judgment where they can come after you for the amount lost, or they can 1099 you for the amount they lost or they will do nothing.

I own a home in Southern California. I bought the home using my VA benefits.

by Leave a Comment

Question: I own a home in Southern California. I bought the home using my VA benefits. I am 3 months behind in my mortgage. It doesn’t look like the mortgage co. (Countrywide) is going to modify the loan so that I may keep it, already contacted HUD and they sent a modification proposal to Countrywide 30 days ago but Countrywide has yet to receive it. My question is, I owe $64,000 on a Home Equity Line of Credit I got through Washington Mutual Bank on the house. If Countrywide forecloses, do I still owe the Equity Line of Credit? Will Washington Mutual come after me for the money? I owe $220,000 on the house, it was just appraised at $175,000. Thank you.

Answer: – California may be one of the few states where they don’t come after you for a deficiency judgment. If your home is foreclosed on, typically they will 1099 the borrower for the amount they lost. However, VA loans have special exceptions. With VA loans, I believe they may have the right to come after you for the deficiency judgment. You may want to check with an attorney in California on this, but it seems like that’s what I remember.

If my home goes into foreclosure what happens to my Home Equity Line of Credit?

by 2 Comments

Question: I live in Idaho. If my home goes into foreclosure what happens to my Home Equity Line of Credit that is attached to the value of the property?

Answer: -Your home equity line of credit (HELOC) gets wiped out if no one bids. Then, typically your 2nd lien holder will 1099 you or file for a deficiency judgment. It’s more common to receive a 1099.

I have 2 homes in Florida. If I have to let the one house go, can Countrywide come after my life savings. Will they put a judgement on me?

by 1 Comment

Question: I have 2 homes in Florida. My primary residence has a very high payment because our other house never sold. I am having a hard time making the payments. My job of almost 20 yrs was outsourced over seas. I am working a temp job until February. If I have to let the house go, can Countrywide come after my life savings. Will they put a judgement on me?

Answer: -More than likely the loan was created with the home being sufficient collateral, so in the event you couldn’t pay, the loan company would take the house. So they can’t come after your life savings. However, they can come after you with a deficiency judgment which is the difference between what you borrowed and what you sold it for. If filed, then yes you would have to pay them what the difference is. This is more common in mortgage states. You can see what what your states primary security instrument is and research the laws for your state.