Mortgage Companies May Sue Walk-Away Borrowers

By
Real Estate Broker/Owner with Ocean View Realty Group in Ormond By The Sea Florida BK559597

ATLANTA, Feb. 22-Homeowners who are considering "walking away" from their home to avoid making their mortgage payment need to know that their mortgage company may try to file a lawsuit to recover the amount owed on the home.
In addition, homeowners who sell their home for less than the amount they owe-a process called a "short sale"-may be sued for the unpaid balance, even after the sale of the home. Finally, homeowners with unpaid home equity loans or second mortgages may also face legal action if they "walk away" from an unpaid mortgage, or conclude a short sale.
"My advice is that no homeowner should ever simply walk away or turn in the keys without receiving a document that absolves them of all liability," said Frank Alexander, professor of law at Emory University School of Law and a member of the board of directors of Consumer Credit Counseling Service (CCCS) of Greater Atlanta.
"A borrower facing a foreclosure should assume that a post-foreclosure lawsuit is possible," said Alexander. "In addition, no homeowner should ever participate in a short sale without receiving a signed agreement clarifying that all outstanding debt has been forgiven. The same is true for all deed-in-lieu of foreclosure resolutions."
Before the current mortgage crisis, mortgage companies usually did not sue homeowners after foreclosure or short sales because many borrowers had little income and few remaining assets, according to Alexander.
But the increase in homeowners deciding to "walk away" from their homes means mortgage companies may file more lawsuits to try and recoup their losses. In addition, Alexander says that mortgage companies are often selling promissory notes for the amount owed on the mortgage, at steep discounts, to collection agencies. The collection agencies will likely pursue the former homeowner to collect the amount owed.
Because some borrowers who decide to walk away from their homes still have good incomes, Alexander predicts an increase in the number of lawsuits filed by mortgage companies to obtain garnishment of a homeowner's wages. "Garnishment actions are going to become quite common in late 2010 and throughout 2011 and 2012," he says.
If a homeowner involved in a foreclosure, a short sale, or deed-in-lieu of foreclosure has any questions about this issue, Alexander recommends that they hire an attorney to determine if their mortgage company has any basis for legal action.
Source: PRNewswire

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Al Raymondi
Ocean View Realty Group
1350 Ocean Shore Blvd. Suite A
Ormond Beach, FL 32176
Ormond By The Sea Florida sales and rentals of homes and condos www.ovrealty.com 
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Rainmaker
4,077,525
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

So many families have lost their jobs, and unable to secure another, and homes are lost.    It is all a sad story!

Feb 28, 2010 12:06 AM #1
Rainer
86,058
Vickie Osoria
Keller Williams Realty - Leland, NC

Great tip Al.  Things are definitely changing due to the large foreclosure rate.  We've all got to be on our toes for sure.

Feb 28, 2010 12:07 AM #2
Rainmaker
621,479
Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

It is a hard situation for many!!

Feb 28, 2010 01:18 AM #3
Rainmaker
1,099,076
Al Raymondi
Ocean View Realty Group in Ormond By The Sea Florida - Ormond Beach, FL
Ormond By The Sea Florida - Home and Condo Sales

Unfortunately there may be some foreclosed owners that are not aware that the lender may go after them in the future to try to collect the difference.  We need to be sure anyone we work with is aware of that potential and tries to protect themself.

Feb 28, 2010 11:13 PM #4
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Rainmaker
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Al Raymondi

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