What happens to the remaining debt after a foreclosure?

When a borrower loses their home to foreclosure and still owes their lender money after the sale, the remaining debt is usually referred to as a deficiency. Lenders can sue to recover this amount. For example, if you owe $500,000 on your mortgage and can no longer afford to make payments on the note,…

Do you have to pay a deficiency judgment after a foreclosure?

Regardless of your state’s deficiency laws, if your home will sell at a foreclosure sale for more than what you owe, you will not be obligated to pay anything to your lender after foreclosure. Your lender is obligated to apply the sale price of your home to the mortgage debt.

When does a consumer become liable after a foreclosure?

According to the Official Interpretation if the creditor forecloses on the property and the proceeds of the foreclosure sale are less than the unpaid balance on the loan, whether the consumer has continued or additional responsibility for the loan balance after foreclosure, and the conditions under which liability occurs, will vary by State.

Why are mortgage companies losing so much money on foreclosure?

Fallen home values have caused mortgage lenders to lose large amounts on foreclosing homes worth less than the amount of their mortgage loans.

How much debt is canceled in a foreclosure?

The original purchase price was $170,000, the home is worth $200,000 at foreclosure, and the mortgage debt canceled at foreclosure is $220,000. At the time of the foreclosure, the borrower is insolvent, with liabilities (mortgage, credit cards, car loans and other debts) totaling $250,000 and assets totaling $230,000.

When do foreclosure proceeds remain after the sale?

Excess proceeds from a foreclosure sale result when a home is sold in a foreclosure auction, and there is a surplus remaining. When a lender auctions a home with a loan balance that is less than the sale price, foreclosure proceeds remain from the sale.

How much is Benavides still owed after foreclosure?

In November, more than three years after the foreclosure, he was stunned to learn he still owed $115,000 — with the interest alone growing at a rate high enough to lease a luxury car. “I’m scared, you know,” Benavides said. “I can’t pay.”

Can a bank come after you after a foreclosure?

When this occurs, the bank may decide to pursue a foreclosure on the property. Depending upon the state, the bank may be able to come after you for money following the foreclosure. A foreclosure permits the bank to take possession of the home.

When does a bank start the foreclosure process?

A bank can’t just start the foreclose process on a home whenever it wants. Homeowners have to first default on their mortgage, failing to pay their required monthly payments. And it’s rare for lenders to begin the foreclosure process after just one late mortgage payment.

Can a bank collect on a note after a foreclosure?

Not all states allow lenders to collect on the note after a home has been foreclosed on. These states are referred to as “non-recourse” states because they only allow the lender to take back the collateral for the loan (your home).

Can a bank keep more than what is owed on a foreclosure?

The bank does not have a legal right to keep the money more than what is due on the loan. They can take the full amount of the loan, plus costs and fees, but anything that is left over should go to the previous owner. When a person loses a home to foreclosure, it’s only natural for them to move on with their life.