Talk About Bankruptcy

As troubling it is to lose your house to foreclosure, borrowers may still be on the hook for the deficiency amount. It is the difference of what’s owed on the home loan and what the bank could sell for at an auction. “Deficiency judgments” can hurt ex-homeowners years after they have lost their property.

It can be an unexpected surprise for anyone who have sold their house through a short sale where the lender agreed to sell the house for less than the mortgage owed.

Vanessa Corey who achieved a short-sale on her Fredericksburg, VA property in 2008 is a true story. Years after she had completed construction to her home in 2004, tragedy struck leading to a legal divorce with her husband and the emergence of the economic recession, pushed her to sell the property through a short-sale.

As a property agent, she assumed the lender had agreed to disregard the difference in amount owed after the short-sale. Late last year, her legal representative produced a letter from her lender with a demand to pay an owed amount of $65,000. As she didn’t have the money, she declared bankruptcy.

Numerous banks choose not to make statement about the subject of ‘deficiency judgments’. Corey’s bank, BT&T confessed that they were going after more borrowers with deficiencies.

Are You Protected From A Deficiency Judgment? Whether banks can pursue such a feat depends on several factors including what state the borrower lives in. Other factors include whether there is a second mortgage or other liens involved. It can certainly haunt borrowers if they chose to ignore the possibilities of deficiencies.

According to Richard Zaretsky, a certified real estate attorney in West Palm Beach, Fla, once your lender has a judgment on you, they can come after you irrespective of where you live. They can request for your financial records, have your wages garnished and place you in jail if you fail to respond.

In reference to home foreclosures, lenders can pursue deficiency judgments in more than 30 states. According to the U.S. Foreclosure Network, an organization of mortgage firms, this includes states such as Florida, New York and Texas.

Luckily they do not allow ‘deficiency judgments’ in California and Arizona. Other states that prohibit these judgments include Wisconsin, South Carolina, Washington, Pennsylvania, Oregon, N. Dakota, Alaska, Iowa and Montana.

As financial institutions are likely to agree in forgiving the deficiency amount, many ex-homeowners do not know that they are needed to opt for a release. This can be done by having your legal representative demand a release from your financial lender.

According to Zaretsky, people should not have a false sense of security thinking that a deficiency judgment will not come back and haunt them. He expects many of the deficiency judgments will be filed over the next few years as many of these accounts were sold at discounts to numerous collection agencies and third parties. These organizations would not have bought these accounts if they were not planning on recouping their initial investments.

Judgments don’t have to be obtained immediately by lenders or collection agencies. They may choose to wait until the debtors have financially recovered before they file with a court. In the state of Florida, the lender has up to 5 years to file. Upon receiving judgment, the lender has up to 20 years to collect the debt with interest.

Regardless of how small the debt is, banks and collection firms can pursue borrowers. Mr. Varno together with his wife sold their Nashville home in 2004 through a short-sale arrangement once he lost his job. 48 months later in 2008, he was pursued by the 2nd lien holder for $25 K. His defended himself by stating that they had released the title and that did not make him liable anymore.

Disappointingly enough, that is far from the truth. Although the title was released, this will not make the debt vanish. As there are differences in state laws, a regular mortgage contract is split into 2 provisions. The first being the collateral exchange where the property is pledged. The 2nd is the contractual guarantee to pay off the loan.

Financial institutions may drop the liens to help allow a short-sale. This however does mean that they will terminate the original contractual agreement for the borrower to repay the loan as stated in the promissory notes. After selling the house, the secured debt can evolve into an unsecured debt.

Zaretsky pointed out to one of his customers who went over the mountain when he got a short-sale. He blindly signed away all the papers that his loan agent had given him with the inclusion of a document that made him still legally responsible for the debt.

According to Zaretsky, he had no idea what was going on. The lender could go to court and convert the confession into a deficiency judgment.

Financial institutions are not very trustworthy or may not be acting on your best interest. Zaretsky explained of a separate borrower who was rich and eligible to pay off the debt. However, the financial institution did not reciprocate as they knew they can later come after him for a deficiency judgment.

Mr. Tolchinsky, a Florida state realtor claimed that financial institutions may pursue borrowers who walk-away if they suspect that they may have other listed assets.

Financial institutions may conduct due diligence to see if the home was abandoned due to real reasons of the borrowers’ financial hardship. It this was not the case, the financial institution will come after the borrower for the remaining debt.

If you are unsure, it is recommendable to obtain the services of an attorney to make sure that the debt in the short-sale or deed-in-lieu agreement is negotiated away.

Get the latest news reports and tools on how to avoid mortgage foreclosure. Download the Free Podcast about How To Avoid Deficiency Judgments After A Short-Sale for your own use, blog or website.

New legislation coming from Capitol Hill will allow Fannie Mae to take legal action against mortgage owners who did not make their house payments although they were fully capable of making them.

The situation has imploded to the point that there may be more than 2.4 million foreclosures that will occur. And this doesn’t include the millions of homeowners who are upside down on their homes.

These strategic defaulters who could obviously pay their mortgage but decided it was not worth their time or money and who did not complete a workout alternative in good faith will have to face Fannie Mae who plans to limit their access to government-sponsored home loans for seven years.

But that’s not all. Mortgage lenders who feel they have been defrauded by these consumers will seek deficiency judgments in court. This will legally bind the borrower who has quit paying on their home loan to pay any balance that is still owed after their house is sold off.

In the state of California, a bank or mortgage lender can only obtain a court ordered deficiency judgment if the home loan was used to refinance a home but not if it was used to fund a purchase.

And as regards the ability for future borrowers who have purposely defaulted on their current mortgage to attain another government-sponsored home loan?

Think about it for a moment: What if Fannie Mae took the stance that any government sponsored loans such as a FHA loan would not be available for ones who simply walked away from their home loan?

Especially if it can be proved that they engaged in a “strategic default” or the abandonment of their home to foreclosure not because the payments were unaffordable but because the home buyer became upside down on their St Louis loan. In other words, the mortgage loan is larger than the value of the residence.

How long will this borrower be in financial limbo? Well, according to Fannie, they would not buy or guarantee another home loan for these fraudsters for seven years.

The research firm CoreLogic interestingly points out based upon their recent data that homeowners will more often than not continue to pay on their mortgage even if their house value drops if they have the money and income to do so.

But borrowers on both a local and national level are more likely to walk away from their St Louis home mortgage loan when the home’s value is at least 25 percent less than the original home loan amount.

March 2010 saw about 31 percent of foreclosures as strategic walkaways by the consumers themselves which was compared to only 22 percent in March 2009.

However, many are now questioning why it took so long for Fannie Mae to make these debtors finally owe up to their financial responsibilities?

And then there are the hardliners who feel the punishment as it were should last longer than seven years. Why? Because they feel the mortgage collapse was a direct result of these irresponsible home buyers.

The real problem started when homeowners began treating their house as an investment or A.T.M. instead of their family’s home.

As a struggling nation trying to get back its financial strength, many experts are calling for the use of common sense and thus get back to the traditional viewpoint that a house is a home to live in and not our own personal A.T.M.

Fannie Mae is apparently not letting bygones be bygones. Not only will they refuse loans to these home buyers for seven years, they are getting court orders seeking deficiency judgments making them pay any balances owed after the home is sold.

Many are now considering why the current Administration seems to be sweeping this issue under the political carpet as if this is not a serious problem when in reality it is of huge importance especially since Fannie Mae has taken such a strong stand against these homeowners.

Visit this website to learn more about St Louis mortgage refinancing loans. Stop by Floyd J. Tapia’s site where you can find out all about St Louis finance and what it can do for you.

As a homeowner you must be stressed about keeping up with the mortgage amortizations. You know that failure to keep up with the periodic payments would result in eviction. Raising money may solve your worries but it may not be possible for you.

The Real Estate Settlement Procedures Act (RESPA for short) protects you when you get a new mortgage or refinance your existing mortgage by requiring mortgage brokers to be upfront about their fees, costs and broker markup prior to writing your mortgage. The powerful banking industry lobby got this law to exclude standard banks; therefore, you have to be more diligent when shopping for a mortgage from a regular bank rather than a mortgage broker.

Banks make the majority of profit from mortgage lending by selling the mortgages to the secondary mortgage market. They maximize this profit when they write a mortgage with above-market interest rates. The bank count on the fact that most consumers are bewildered by the prospect of obtaining a new mortgage or refinancing, and therefore don’t know the going wholesale rates for mortgage loans. The best way around this is to find a mortgage broker with a good reputation — one that makes the bulk of their money on origination fees, rather than interest rate mark-ups. Then, you can find out what the local wholesale rates are for a new mortgage and a refinance (they’re generally different rates) and you can compare the broker’s rate with the bank’s rate, and see who is marking up their interest rate more.

The first condition is that the reason for not forking out enough money for installments should be genuine and not intentional. The second condition states that the current house loan payment should have exceeded 31% of the homeowner’s gross salary. Thirdly the applicant for the program should declare all information regarding property and cash flows. This is important for having the foreclosure halted and also for the improvement in loan conditions.

If you satisfy these conditions then you are eligible for the program. There are however more programs that deal with issues of foreclosure. Look in to other options also to solve your problems. Check out the site for loan modification solutions to find more solutions and options.

There are more articles about, government credit card help and government credit card help that can help you further

Many people think that they won’t be able to find a bad credit refinance offer, but this isn’t always true. If you have adequate equity in your home and a stable income,  you can usually do a home refinance – bad credit won’t always prevent you from getting a mortgage refinanced. Depending on the creditor, even car and personal loans can be refinanced.

Many finance companies understand that people want to pay their bills, but sometimes can’t due to circumstances beyond their control. Just a few missed or late payments can negatively affect your credit rating, and it can take years to recover. Before applying for refinancing, pull a copy of your credit report and review each detail. Often, consumers find that there are mistakes on their report. If you find any erroneous data on the report, contact both the credit agency and the reporting company and ask for it to be corrected. If there is supporting documentation, include it with your request.

Once your credit report is correct, go over each remaining negative item and be prepared to explain how each situation happened. Medical problems, job losses and divorces are common problems that cause payments to be delayed and negative reporting to occur, and  the creditor may be more forgiving. If your debt is due to irresponsible spending habits or poor business decisions (such as try to make money with a penny stock tip), you may be facing an uphill struggle.

The most important thing to the finance company will be that the issue is corrected and that you are current on all existing obligations. If you have always paid your rent or utilities on time, you will often be able to get a letter or recommendation stating those facts from your landlord or utility company. This information is rarely reported to credit agencies.

Use your current work record and pay stubs to prove to the financing company that you are gainfully employed and have an adequate source of income to pay your current bills as well as the refinanced loans. The finance company may also want to see your recent bank statements to determine if you have a savings safety net in case a new emergency comes up. While they may not require it, most experts recommend that the typical family maintains a six month cash reserve.

If you can satisfy all of these requirements, you are well on your way to finding a bad credit refinancing solution.This could be a great way to lower your interest rate or preventing a loan from going into a default status. Before accepting a loan, shop around to find the best terms.