Question: I have a home in Arizona [anti-deficiency state] that was purchased with an 80/20 loan. I have never refinanced the loans. We were in the process of negotiating a short sale, got approval from the first [with Country Wide] and they agreed to pay the 2nd [Citi] $3k, when we went back to Citi to get final approval we discovered that they charged off the 2nd and sold the loan to a subsidiary which has now turned it over to an attorney that claims they are going to file a deficiency judgement against me and collect the debt. They claim that since it was a second mortgage and it was charged off that they can do this. It was a second but it was a “purchase money” loan. Can they come after me for the deficiency?
deficiency judgment
Primary residence in Arizona, my secondary in Florida.
Question: My primary residence is in Arizona, my secondary ( a rental ) is in Florida. I’m stuck in an interest only loan that has me paying on more than what the home is worth. If I should have to go with foreclosure on the 2nd home as a last resort can they take away my primary residence?
Answer: -It depends on what it says in your closing docs. Most lenders only worry about the property on hand and make sure it’s sufficient collateral to support the loan being made. So most people don’t have to worry. I would only worry if a judgment is filed against you after the foreclosure and you have several properties in your name.
Equity Line of Credit and Foreclosure
Question: I live in California; if my home goes to forclosure and I have a an equity line of credit, will the line of credit, $150,000 also be wiped out? The line of credit is secured by the property.
Answer: Yes, if the line of credit is secured by the property in foreclosure. Most homeowners have a home equity line of credit that takes a 2nd lien position on their home. If the home is foreclosed on by the 1st lien holder and no one bids at the auction, the 2nd is wiped out, and the bank has the option of issuing a 1099 to the homeowner or filing a deficiency judgment against them. In most deed states, including California, it’s very uncommon for the lender to file a deficiency judgment. If you know what you are doing, there are things you can do to prevent a deficiency judgment altogether so it’s never an issue.
Idaho Deficiency Judgments and Anti-Deficiency Laws
Question: I know that Idaho allows Deficiency Judgments. I’ve heard that Idaho also has Anti-Deficiency laws and that they apply only to 1st mortgages on a primary residence. Is this true? What criteria needs to be met to be protected by the anti-deficiency law in Idaho?
Answer: – It’s so hard to say because every state is different. Typically states with anti-deficiency laws apply only to 1st mortgages, and it must be your primary residence. It may also depend on what type of loan you have. In Arizona, despite the anti-deficiency law, if it’s a VA loan, they can file a deficiency judgment. In most cases throughout the U.S., lenders very rarely file deficiency judgments on 1st mortgages, they just take back the collateral. Lenders in 2nd position are more likely to file deficiency judgments because they are the ones taking the biggest losses and they have no way to re-coop their losses because the first took the house. And even still, most of them will 1099 the homeowner. One of the best things you can do is have someone negotiate a short payoff or a short sale on your home and have the lender agree to a “satisfaction” which means the lender is giving up their right to go after the homeowner for the deficient amount. If they only agree to “release the lien” then they still have their right to file a deficiency judgment.
Idaho laws? How many days to file deficiency judgment and 1099? Can the lender do both, send a 1099 and file deficiency judgment?
Question: Idaho laws? Balance at time of foreclosure 465K, opening and closing bid 247,500 sold back to lender. How many days to file deficiency judgment and 1099? Can the lender do both, send a 1099 and file deficiency judgment?
Answer: – Typically they will choose to either 1099 you or file a deficiency judgment. Not both. In terms of when that will happen, your guess is as good as mine. Usually it’s pretty quick. Sometimes it takes a little while. There are other factors that also influence when they will issue the 1099 or judgment. Like what lien position they are in. It makes a difference whether they are in 1st position or 2nd position. A lot of times, the 2nd lien holder will not file for a very long time, sometimes up to several years before you see anything. I’m assuming in this case you are referencing a 1st lien holder so my guess it that you will know something very quickly.
The most common outcome is a 1099 from the 1st lien holder. So really what you have to be aware of are the tax obligations. They will count that deficient amount as income to you. So make sure you have a good accountant who can usually counter that tax obligation by claiming insolvency. Usually that’s a far better option that bankruptcy or having to work out a payment plan to pay back the amount that is deficient.
Short sale and release of lien
Question: Close to signing a short sale agreement between my first(Countrywide) and second(WAMU). this is a rental, Countrywide has settled, second will accept $7000 to release the lien, however they still want to come after me for the $93,ooo balance. Broker(advocate) was told that WAMU has already charge of the second as bad debt. Can WAMU sell the note to a collector that will still come after us for the full 93,000K. Been advise to try to settle with wamu at an agreed amount and make $100/MONTH PAYMENTS TO LIMIT LIABILITY. Any other questions to consider? If the house goes into foreclosure, Countrywide does a trustee sale are we finished with wamu too?
Answer: The best thing you can do is ask for a satisfaction of the loan. Ask them how much they need to “satisfy” the loan. Typically you’ll have to pay more for a satisfaction of loan, but they give up their right to come after you for the difference. If they’ve agreed to “release the lien” then yes, they can and usually will come after you for the difference. If the home goes to foreclosure, you can bet WAMU will file a deficiency judgment because it sounds like that is what they are planning to do anyway. So, no, you are most likely not finished with WAMU. The best thing you can do is try to get them to accept a satisfaction. Good Luck.