There are options available when you find yourself unable to pay your mortgage bill. You can get a loan modification, agree to a repayment plan, or try to refinance. However, your mortgage company isn’t obligated to work with you.
Failure to repay your mortgage can result in the lender foreclosing on you, and many don’t know what foreclosure help is available. Since you couldn’t meet the terms of your contract, they’re permitted by law to reclaim your Palo Alto property to make up the difference.
In a worst-case scenario, you could face a deficiency judgement by the court. Here are some deficiency judgement tips and what the ruling means for you.
Normally, a foreclosure is the extent of a lender trying to collect on a loan. You lose possession of your property and surrender it to the lender as collateral. In turn, the debt is covered at the cost of your home and is also a major hit to your credit score.
However, a lender may decide that the sale of the property isn’t enough to cover the debt. If the court agrees, then you’re given a deficiency judgement allowing the lender to collect on the additional money owed.
Most states, including California, allow a deficiency judgement as long as it doesn’t happen after a nonjudicial foreclosure.
A deficiency judgement means that even after you’ve lost your Palo Alto home to foreclosure, you’re still expected to make payments to the lender. A mortgage lender can reclaim the defaulted loan in a number of ways, depending on who they are.
Deficiency judgement liens give a creditor interest in any personal property owned at the time of the lien. Wage garnishments allow a lender to take part of your employment income as well. They can also levy your bank account to legally take funds directly from your account.
Lenders can take advantage of a short sale to sell their property for less than the total amount owed to settle a debt with a mortgage lender. However, that doesn’t protect you from a deficiency judgement unless the lender specifically noted that it would settle the larger debt.
California is one of the few states that protect against these judgements after a short sale. To further protect yourself, there are some common defenses available when a lender chooses foreclosure.
You can prove that the mortgage lender hasn’t followed California’s foreclosure laws. They also have to prove that they are the loan’s owner, or they can’t legally foreclose.
If you’re lucky, the lender may have waited too long and passed the statute of limitations.
A deficiency judgement is one of the worst things you can face after a foreclosure. It limits how much you can recover afterward and could force you into bankruptcy.
Are you facing foreclosure in the Palo Alto area? We can help.
The Estavillo Law Group has 50 years of combined experience in Real Estate and Foreclosure law. At our firm, we promise to deliver quality results. Contact us to learn more.