Waiving a Deficiency Judgment Depends on the Homeowner’s Wealth

Famly law, appeals, elder abuse, civil litigation

THE COLLECTABILITY OF A PARTICULAR DEFICIENCY JUDGMENT IS THE MAIN FACTOR

Bank of America wants to end the suspense as to whether or not a homeowner gets sued for the deficiency after the short sale.

Jack Schakett, Bank of America senior vice president for credit loss and mitigation strategies, said this week that if a borrower proves he can no longer pay the mortgage and has few or no assets, the bank will waive its right to a deficiency judgment during the closing of the short sale deal.

But if someone can afford to pay or has assets, the bank will try to negotiate a set fee for the borrower to pay at closing. If the borrower refuses to turn over financial information, the bank will retain its right to go after the money.

“We want to help customers who legitimately can’t afford to make payments, but we don’t want the ones who have a bunch of money to just be able to walk away,” Schakett said. “They have to share some of our pain.”

The short sale process is becoming standardize with 7 out of the top 10 mortgage lenders now use an electronic system called Equator.

Unemployment, not just lack of equity, is driving foreclosures, Rick Sharga of RealtyTrac, the leading source of data on foreclosures, told a gathering of real estate editors. Processing of so many foreclosed properties has slowed down and the so-called “shadow inventory” has grow so large that it will take until 2013 to work them through the system, he said.

2 thoughts on “Waiving a Deficiency Judgment Depends on the Homeowner’s Wealth

  1. Paul, thanks so much for getting right back to me. But I’m still unclear.

    1. If I am weighing whether to do a short sale or a foreclosure on my home, are you saying that the bank has only 6 months to come after me either way? It makes no difference. I thought with a short sale, they have more time. I have only a first with B of A. Are there any circumstances with only a first where the bank can have up to 6 years to claim the deficiency loss?
    2. Is there any law against having someone arms length make a short sale offer and then turn around and allow me to rent the home back from them?
    3. Then may I buy it back sometime in the future? If so, how long?
    3. Is there any advantage to homesteading my property?
    4. If I allow my home to be foreclosed, must I move out on the day of foreclosure? If I allow my home to go through a short sale, then I would not have to move out. Is this correct?
    5. If I am no longer concerned about my credit score (I will never borrow again), then what advantage if any is there to a short sale over a foreclosure?

    Thanks so much for your help,
    Rene

  2. I am still unclear about what to do if I have some assets.

    1. If I am weighing whether to do a short sale or a foreclosure on my home, are you saying that the bank has only 6 months to come after me either way? It makes no difference whether it is a short sale or a foreclosure. I thought with a short sale, they have more time to claim the deficiency loss. I have only a first with B of A. Are there any circumstances with only a first where the bank can have up to 6 years to claim the deficiency loss?
    2. Is there any law against having someone arms length make a short sale offer and then turn around and allow me to rent the home back from them?
    3. Then may I buy it back sometime in the future? If so, how long?
    3. Is there any advantage to homesteading my property?
    4. If I allow my home to be foreclosed, must I move out on the day of foreclosure? If I allow my home to go through a short sale, then I would not have to move out. Is this correct?
    5. If I am no longer concerned about my credit score (I will never borrow again), then what advantage if any is there to a short sale over a foreclosure?

    Thanks so much for your help,
    Rene

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