What is a Deficiency?
Explanation
If your house sells for enough money to cover the amount of the loans against it, the lender is made whole.
If the house sells for less than the loan there is a "deficiency."
After a trustee’s sale, the lender is generally unable to go after the borrower personally for any deficiency—a major disadvantage for the lender. The lender is said not to have recourse and the loan is "non-recourse".Find out whether your state is a recourse or non-recourse state.
In most states, anti-deficiency laws only apply to purchase money loans. These are loans made for the actual purchase of your property. If you took out a second loan, such as a Home Equity Line of Credit (HELOC) or refinanced, you are probably not covered by the anti-deficiency rules. The lender has "recourse" against you.
State's vary in their rules regarding deficiency judgments and you should check the summary for your state in the State-by-Foreclosure Guide. You should also follow the link to your state's statutes.
Short Refi and Income Tax in CA
we are located in CA, and in 2009 we had loan modification and short refinance on the same home that we are living. It is the principal residency. Now, I have two questions:
1. For tax purpose I have received 1099-C with the box 5 checked Yes. Based on my research, that means it is a recourse loan. But if I understand correctly, in CA the loan for principal home should be Non Recourse. So, I don't understand which one is the correct one for our situation.
2. If it is Recourse, does this mean that we have to pay back the amount that has been written off by the lender and shown in 1099-C? Or is this only in case of defaulting like foreclosure?
I would appreciate for any help.
Miguel (migchung@gmail.com)
What happens after Trustee Sales?
Hello Mr. Thompson, I live in CA and our home is going through a Trustee Sale. I have been working with 4 different people regarding my home- and I have just been passed around over and over again trying to get approved for a Deed In Lieu of Foreclosure. Just recently when my 2nd mortgage agreed upon a settled amount for a payoff settlement- my loan with them was transferred to a Debt Collection Agency.
I now have lost all hope on trying to get this process completed, and my 1st mortgage company just informed me that they have decided on a Trustee Sale 15 days from today.
This is my first home, and I'm really in the dark as to the steps of the trustee sale and what happens to me afterwards and the unpaid balances on my 1st and 2nd mortgage. I ask my mortgage company reps and the worker from the mortgage company for help and explainations and they just keep passing me around.
I would just like to know what happens to me after the Trustee Sale and what happens to the unpaid loan balances after the trustee sale?
When I first bought the house- it was 100% financed- therefore I have a 1st and 2nd mortgage on the home. I did not take any equity out on it or refinance it. Can you please help me on providing some information Thanks.
Two loans with Chase. Need help.
Hello, currently we're selling our house in Queens, New York because mortgage payments have become too overbearing, but havent missed a payment. We have two loans with Chase, who has denied us twice of a loan modification (either lower interest or convergence into one loan). About two years ago, we refinanced, and have variable interest rates. The current value of the house is around 470k, but owe about 560k on the loan. Do you believe our best bet is to try to sell the house, go into foreclosure, short sale, bankruptcy? Will the bank file a suit for deficiency?
Our financial situation is such a burden, and we have even put $50,000 into credit cards because of our mortgage. Help please!!!!!!!!!!!
deficiency judgment
Hello...
Thank you for your informative website.
I have an investment property in Vallejo, Ca. I am thinking about short selling the property. I looked through my loan documents and it looks like I have a promissory note with the lender. The house has been refinanced and has one loan only. What can I do to negotiate successful non-recourse short sale? How do you recommend to find legitimate attorney to help you negotiate short sale?
Thank you.
Rose from CA
RENTAL PROPERTY FORECLOSED
I have this rental property in Sacramento, CA and it just recently foreclosed after the bank denied our short sale applications (twice). I have 1st loan and 2nd HELOC. If the bank will cancell the debt thru 1099, does it mean we do not owe the bank anymore? If not cancelled, can the bank sue us or go against us with the defieciency? Does the bank had the right to garnish from our salary or put a lien against our primary residence? What actions do we need incase the bank will go after us? Is Chapter 13 a possible solution. How long does a Foreclosure and Chapter 13 will be reflected in our credit? Thanks and more power to you!
My entire morgage was refinanced as a "home equity loan"
In '05 I refinanced my 1st mortgage to pay off a home equity loan so I would have one single mortgage. For some reason, the new loan was categorized as a "home equity" mortgage. Does that mean I would be liable for the deficiencies? I can't really afford the house as I keep using credit cards for emergencies or supplementing and I'm further in debt that when I started. I owe 124,000 and the homes in my neighborhood are only selling for 129,000 to 135,000... I may have to spend (& borrow) some money to get that price... then I'd have to pay the Realtor. Is walking away even an option?Wisconsin
Agree to IndyMac Short Sale terms?
We purchased an investment property in Fresno that we are now attempting to do a Short Sale on. There is no second, and the paperwork is just about complete, but we are concern with this statement in the Short Sale Lender Agreement:The borrower must sign the attached acknowledgment to all terms specified in this approval and must acknowledge that Indymac Mortgage Services retains all deficiency rights as provided by the note, deed of trust and/or security agreement in accordance with local and federal laws.Can IndyMac come after us for the deficient amount if the sale is approved?
Re: Short Sale terms
Anti-deficiency statutes generally don't apply to investment property. The lender appears to be stating that they are not giving up any rights that they had prior to entering into a short sale agreement with you. I highly recommend consulting with an attorney--an examination of all the paperwork and attendant facts is essential.
Primary in Illinois, Rental in Nevada
I own a home in Illinois, with a mortgage of 250k, and a market value of 500k. I have stocks of 200k. I bought a house in Nevada for 360k and have a mortgage on it of 300k. I rent the property, but it's market value is now 170k. The renters moved out and I can't get it rented. I would like to "let it go" through a foreclosure. I am concerned if the Nevada lender can lien my Chicago primary residence, and/or go after my stocks, and/or garnish my wages with a deficiency judgment. Do you know if they can? Also, I have contacted an attorney in Illinois who directed me to find a NV attorney, but my RE agent in Nevada said I need an Illinois attorney. Any thoughts? Your advice is greatly appreciated.
Residential loan non-recourse?
Thank you so much for replying to my questions about deficits in foreclosure. When this property was re-financed, it was refinanced for a residential loan, not a rental. My understanding is that this would make it a non-recourse loan? If it is a non-recourse loan, I was thinking that the bank could not sue me for a deficiencies. Is this generally true? Again, thank you so much for your response. I can not tell you how appreciative, I am.
Residential loan non-recourse?
Most Deed’s of Trust have an occupancy requirement which determines whether a property is considered a principal residence. Here’s a typical clause:“Borrower shall occupy, establish, and use the Property as Borrower’s principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower’s principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in write, et. Cetera.”This clause, if there is one in your Deed of Trust (or mortgage) is subject to interpretation by North Carolina law. Consult a North Carolina lawyer for a legal opinion.
Deficiency judgment on rental property?
I have a question in regards to what happens to other property that a person might own if a person is forced to foreclose on a home. I have had renters in a home and they have just given me notice that they are vacating. Without the rental money, I can not make the mortgage payment. I do not have the money to go in and do a rehab on the property. It is not rent-able until it can be rehabbed. I owe the bank approximately $190000 and the tax value of the property is approximately $220000. I think it would take about $50000 to do the work needed. I was declared disabled three years ago and the disability that I receive is not enough to make the mortgage payment on the rental property and pay my bills. I have another rental property that is in my daughter's name and mine. Can the bank take the other rental property that is held in my daughter's and my name? The rental properties are in N.C. Thank you for your help.
Re: Deficiency judgment on rental property
Owners of rental property generally are not protected by anti-deficiency legislation, which North Carolina apparently has. The tax value of your property is greater than what you owe the bank, but the tax value isn't the important number--you need to talk to a real estate broker about the probable market value of your home. If the market value (even after disclosing the need for rehab) is greater than the amount you owe then consider putting the house up for sale. If, on the other hand, you lose money on the sale, the bank will need to sue you to get any shortfall. Since your daughter is on the title of your other property, they theoretically can only go after your interest in the property. A lien would be placed on that property, and the bank would recover its money when that property is sold. There are a lot of variables--it depends on how you and your daughter hold title, when she acquired title with you, etc. Most of all it depends on North Carolina law--you need to speak with a North Carolina lawyer to sort through the issues. Call a lawyer and ask whether he or she does real estate work and how much the fees are. Advice from a good North Carolina lawyer would be money well spend in your situation.
requesting information about foreclosed
hello Mr. Thompson i just have a question i hope i dont have to pay to get an answer because i wont be able to afford it :-) but if you could be kind just to answer me this question.I was told that when you let your house go on foreclosed the bank or whoever will try to look into your other properties and take them from you, sale them so that they can get some money back to pay what they lost by giving you the loan. IS THIS TRUE MR.THOMPSON?.
Re: requesting information
It depends on the state that you live in and whether you have a 2nd mortgage on your house. Every state has difference rules. Go the State-by-State foreclosure guide on ForeclosedDreams and look up your state. In some States the lender isn't allowed to sue you if you default on your first mortgage--if the money obtained was used to purchase your house. If you can't afford an attorney, call HopeNow at 888-995-HOPE. It provides free foreclosure prevention assistance and isn't a scam. See www.hopenow.com..
Garnish my wages?
I live in California and we are behind on mortgage. We got denied on a loan mod for the 1st loan. Both my loans 1st & 2nd are with our lender. The 2nd is claiming they will garnish my wages if house is forclosed on and they don't get money back from sale. Can they take my wages? Thank you,
Garnishment
In California, a lender can not pursue a deficiency judgment on a loan that was used to purchase a primary residence. However, you can be sued on a 2nd deed of trust. The lender can't just garnish your wages--it needs to file and win a lawsuit. Then it needs to execute on the judgment to obtain a garnishment or other assets. A bankruptcy can wipe out the deficiency. Depending on your circumstances it may be your best option.
Can my lender invoke a deficiency on me if I walk away?
How can I determine if my present mortgage is covered by the anti-deficiency rules?
Depends on the state your home is located in.
Each state has its own anti-deficiency rules. For general guidance visit the State by State Foreclosure Laws on this website. You can find a link on the right side of this page. For more specific guidance, call HOPENOW at 888-995-HOPE for free advice (www.hopenow.com). For in-depth, professional assistance, consult an attorney in your state who has experience helping homeowners. Please be careful of scammers.
if my 2nd loan is in purchase money rule or not
we purchase this house by have 1st loan for $400,000 and 2nd loan for 103,000 we put down payment 5% the purchase price $530,000 in 2005 never been refinance, my 2nd loan is in purchase money rule or not, if we borrow in the same day
if we are in purchase money rule, and they can't sue us for unpaid balace, do i still have to pay other bills like tax or something else?
we do not have enough to pay for other bills if they have, we need to file bankrupt if necessary,
thanks,
sarah
Post new comment