You can walk away from your home, but not your problems!!
Mike said it best in a recent blog about about the financial responsibility of purchasing a house and the consequences of a short sale. It may be too late for some but moving forward, remember when you purchase a house you are signing legally binding agreements. Make sure you can honor them.
Often, sellers think that sending house keys to bank will satisfy their obligation. It will not. When the borrower closed their loan they signed two documents; first, "A Note" which is a promise to pay and second "The Mortgage" offering the home as collateral.
These are two different documents; the loan is a promise to pay the FULL AMOUNT owed or amounts if you have multiple notes/loans. The MORTGAGE, allows the bank to seize the asset, BUT it does not allow forgiveness if the asset is worth less then the note. The bank can and most likely will at some date try to collect the difference. They can hire collection companies, attorneys and even garnish wages. The bank can also 1099 you for the charge off and put a foreclosure on your credit record.
So to walk away is just a short term solution to a much larger problem, a band-aid for a bullet wound. Before your client puts those keys in an envelope, have them seek legal advice and review the many other options like Short Sales, Loan Modification, Repayment Plans and/or Deed in Lieu.
Mike Sher
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