Question: I built a home in New York two and a half years ago for my daughter to live in. The mortgage and title is in my name only for a current balance of $147,000.00. My wife and I live in South Carolina. Our condo here is on the edge. We could probably sell it for what is owed. We also have a boat that probably has $30,000.00 in equity. Add in a Money Market Account with $35,000.00 and $60,000.00 in what were 401K’s but are now rolled into simple IRA’s. Credit card debt is about $10,000.00 Cars are bought and paid for. My daughter has not been able to make the mortgage payments for the last eight months. I have been making them, along with all of my own payments. It has come to the point where I am going to have to let the bank have the house back. I have about $50,000.00 wrapped up in the house, but when the bottom dropped out in rural upstate NY, it really dropped out, and I could not sell the house at this time. If I let the house go into foreclosure, can they touch any of my other assets. My wife is co-signitor on the condo and boat, but again, not on the NY house. I have excellent credit, but I’m at the age where I seriously doubt that I will be making any major purchases any time soon.
Answer: -Can they come after your assets? No. Because when you signed the paperwork, the bank agreed to loan you the money and used the house as collateral. However, if you ultimately go through foreclosure, the bank has the right to file a judgment against you for the amount they lost. So you are expected to pay the difference or in most cases people will file bankruptcy to eliminate the judgment. By doing so would require you to sell some or all your assets. So the best option is to work out a pay off or settlement with the bank for a fraction of what you owe on the loan. This is called a short sale. By having the bank approve a short sale and asking them to satisfy the loan, they give up their right to file a judgment. You’ll also able to avoid foreclosure and possible bankruptcy. Again the key here is to get them to “satisfy the loan”. By doing a short sale, you’re also giving the buyer a good deal on a home that is upside down. Now if you are successful in getting a short sale approved, more than likely they will just 1099 you for the difference. But that’s a lot better than a judgment. And there is a chance they won’t 1099 you either.