An Arizona Republic reader submitted an interesting question the other day that I thought would be worth discussing here.
In Arizona, a mortgage is what’s called a “non-recourse” loan, meaning “A type of loan that is secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan.” In some states, mortgages are partial recourse or full recourse loans, meaning that the homeowner can be held liable for the defaulted amount that’s not covered by the foreclosure sale.
Combs didn’t really answer the reader’s question about how a homeowner’s credit might be affected by a foreclosure – and his last sentence is potentially confusing. The fact is that there’s no way to say for certain how many points a homeowner’s credit score will fall after a foreclosure, but experts agree it could be huge, in the 200-point range. A foreclosure stays on a person’s credit report for up to 10 years. So while a homeowner may be in more serious trouble if he’s damaged the home, the adverse effects of a foreclosure on the homeowner’s credit report will be serious.
Because the issues of personal liability and how a foreclosure will affect your credit score are just two of many that a homeowner facing foreclosure will have to deal with, homeowners in trouble should contact a real estate attorney that specializes in foreclosures or a non-profit foreclosure counseling agency. Last June, former Governor Napolitano created the Arizona foreclosure help line, “a vital link between families facing a housing crisis and access to free foreclosure counseling appointments. The Arizona Department of Housing is contracting with Community Information and Referral Services to staff the call center which will connect homeowners to a local, certified foreclosure counselor.” To reach the help line, call 1-877-448-1211.
What do you think? Click on the “Comments” link to join the discussion!
Comments (0)Subscribe to CommentsComment