Lenders may be able to obtain deficiency judgments against borrowers after a foreclosure or pre-foreclosure occurs to recover the difference between the sale proceeds and the amount owed by the borrowers on their mortgage balances. To avoid deficiency judgments, borrowers should negotiate with their lenders in writing that they will not pursue a judgment against them whenever possible. Each state has different rules regarding deficiency judgments. Some states do not allow them at all. You should check the laws in your state, and consult with your attorney.
Of course, you should try to avoid defaulting on your mortgage in the first place. It may be necessary to speak to a credit counselor or other professional to help you manage your finances. If you experience a financial hardship, there are other measures you can take first to avoid foreclosure. You should explore all your options.
Alternatives
You have alternatives to foreclosure and avoiding deficiency judgments. Start early by communicating with your lender if you determine that you cannot make your mortgage payments or you are in default as a result of financial hardship. The longer you wait, the more serious the situation can result, and you may end up losing your home to foreclosure. Ignoring the problem is not the solution. You may be able to prevent a foreclosure situation by negotiating the following resolutions:
- Reinstatement of your loan
- Refinancing
- Loan modification
- Forbearance
- Short Sale
The truth is your lender wants to help you keep your home and avoid foreclosure in the first place. Foreclosure is expensive and does not benefit the lender. Talk to your lender and consult with your foreclosure defense attorney to find a solution that works for both you and your lender.
Lenders Do Not Like to Sue Their Former Customers
You should be aware that while your lender may have the option to pursue a deficiency judgment against you, most lenders avoid suing their former customers. They may want to do business with you again down the road again. Also, they might not have a forwarding address to serve legal papers on you. Litigation is time consuming and expensive. They have more pressing business matters to attend to. In addition, they realize that you probably don’t have any substantial assets to go after to collect the judgment anyway.
Speak with an Attorney
If you are involved in a foreclosure proceeding, you should speak with a foreclosure defense attorney to find out your legal rights and obligations. The attorney can advise you of the foreclosure deficiency judgment laws in your state and defend you in a foreclosure proceeding.
