Can The Bank Seek Money From Me After A Short Sale Or Foreclosure?

Short Sale and Foreclosure Deficiency JudgementsOne of the top questions we get here at HSC is can a mortgage company seek a repayment of their loss once a homeowner short sells or loses his or her house to foreclosure. The answer is yes, however many banks, especially the large ones do not go after former homeowners for money.

Legally, the bank can obtain what is known as a deficiency judgement on a homeowner who has defaulted on a mortgage that has resulting in a short sale or foreclosure auction.

  • In a short sale situation, a lender can pursue the difference between the amount owed on the mortgage and the amount they agreed to settle the loan for.
  • In a foreclosure situation, the bank can legally pursue any loss that still exists once they have obtained and then re-sold the property.

Should I Be Worried?

If you need to sell your home and you have no equity, then you’re only options are to list it as a short sale or let it go back to the bank. If you are behind on your payments or you fear that you will no longer be able to make the monthly mortgage payment, then another potential option might be a loan modification.

In any case, the bank could possibly come after you for a deficiency, but it is not common. Additionally, the time a mortgage company has to seek a deficiency judgement is limited and varies by state.

The good news is there is new legislation in the works that would limit and standardize the time that a mortgage company has to seek a judgement following a short sale or foreclosure.

The new bill known as The Fairness in Foreclosure Act of 2011 (H.R. 3566) aims to put a one year cap on any deficiency judgement filing for states in which current law allows banks more than 12 months.

Free Help Is Available To You!

If you are facing foreclosure, you have options! There are better solutions available than just letting the bank take your home. Contact HSC today to learn what you can do to either save your home, and/or avoid a foreclosure.

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