Property Management Nation

So you are one of the millions of Americans who was forced to foreclose or short sell your home.  You assumed that you were off the hook from the bank right?  Wrong!  Lenders can still come after you for money if the house was auctioned or sold for less than what you owed.  This can even happen years down the road when you have already written it off! 

These are called “deficiency judgements” and are happening to people who may have even had the bank’s approval for the short sale.  This phenomenon is not limited to those who may have entered into a loan they couldn’t afford or those who had “liar loans” that didn’t verify income first.  These judgements are happening to people who consistently paid their mortgages but due to the current housing market and other unforseen circumstances, like the loss or transfer of a job, are forced to sell their homes for less than what they owe.

Lenders can come after you depending on several factors including whether or not you have a second mortgage, other liens or even what state you live in.  If you have a foreclosure lenders have the right to pursue a deficiency judgement against you in 30 states according to the U.S. Foreclosure Network.  States that are “non-recourse” don’t allow these judgements but if your loan was refinanced at any time it may be subject to claims.  Judgements on short-sales are allowed to happen in many more places and debt needs to be negotiated away with the bank.

Perhaps the scariest part about all of this is that lenders don’t have to file right away.  They can wait several years until borrowers are more financially stable and then garnish your wages, obtain your financial records and even put you in jail if you fail to respond! 

What can you do?  Be sure to ask for a release from the bank on all financial obligations.  This is not just the title, but in accordance with your state laws be sure that you have fulfilled all parts of your mortgage.  There are usually two parts to a mortgage, one that is represented by the title and one that is a promise to pay off the loan.  Make sure you are released from both.  For more information check out CNN Money.