Below is an awesome article I picked up for you to read. It makes a all buch of sense to seek out advice first before acting and trust anyone that could do the job, since we know now that it does not work that way:
There is a real danger lurking around homeowners all over the country, and this malicious entity often leads to mortgage foreclosure and deficiency judgments. Is it a new bank? A new government program hiding behind the facade of a homeowner assistance program? Perhaps even a loan modification organization that caters to homeowners in distress …
No, the real danger to homeowners who need to sell a home is apathy. It occurs after a homeowner has been attempting to sell a home at a price higher than the market will bear but before they are able to close on a short sale that would save the property from going to foreclosure.
This apathy, this feeling that it simply does not matter anymore, often motivates homeowners into abandoning the home and letting the bank foreclose. It often seems like the easiest thing to do. And since some banks are slow at processing foreclosures, it could mean living in your house for several months before you’re required to move out.
But there is a dark side to that plan. It’s called a deficiency judgment.
A deficiency is the difference between what you owe at the time of foreclosure, and the dollars the bank gets after selling the house and deducting all the fees and costs. That includes attorney fees, asset management fees, maintenance and utility costs, repair costs, and selling costs.
Banks can decide to sue for a deficiency judgment at a time most convenient to their agenda, so often it does not occur immediately after the foreclosure sale. And while the subject may not come up during the foreclosure, it doesn’t mean you’re off the hook. They may wait to sue until it appears that you’re back on your feet and have the ability to pay.
The only means to avoid a deficiency judgment are through bankruptcy or effective negotiation with your lenders like we do during a short sale.
Not All Short Sale REALTORS® Are Alike
Unfortunately, avoiding a deficiency judgment isn’t an automatic result of a short sale. Unless your listing agent is a seasoned veteran of the short sale process or works with an attorney who has handled short sales with all the different lenders, you might still find yourself liable. And unless your real estate agent knows how to find the “small print” in the bank’s paperwork to be sure your liability has been released, you could be in for a nasty surprise years after you think that episode in your life is over and done with. Can you imagine still dealing with this home loan 25 years from now?
Thus, eliminating the possibility of a deficiency judgment is one of the most important tasks I perform for my clients. I have a full-time employee/agent dedicated to assisting me to help people get out of the jamb that their home loan has caused, and we are ready to help you determine your best course of action.
If you’re thinking of a short sale, just drop me a note and we can schedule a time to review your own personal situation. Everybody’s is different, and we’ll use our experience to help you make a decision best for you and your family. I’ll be happy to explain the entire process and answer your questions.
Great one to read for better understanding:
With so many homeowners in the US owing more on their mortgage than the house is worth, walking away from your house begins to look like an attractive idea. But is that a good idea? Are there good reasons why you should abandon your home?
Behind on Mortgage Payments
If you are behind on your mortgage payments and have tried but failed to workout a solution with your bank, this may be a situation where your only option is to walk away. You may want to explore some last ditch efforts with your bank like deed in lieu of foreclosure. In this case, the bank takes your house in exchange for not filing foreclosure so you will not then have a foreclosure on your record. You can also explore a short sale option where the bank agrees to let you sell the home and pay them less than what they are owed.
Significantly Underwater
Some areas of the US have been hit the hardest by foreclosures and falling home prices. If you live in one of those areas and your home is significantly underwater, walking away from your house may be a good option. In some areas it is likely to take many years for the housing market to recover. Look at your situation and consider whether or not you expect to even be in your home long enough for that recovery to take place. Again, you may want to explore deed in lieu of foreclosure and short sale options with your bank before making a decision. There is also a government program called the Principal Reduction Alternative (PRA) where you might be able to work with your bank to reduce the amount that you owe on your loan. There are financial hardship requirements for this program so check with your bank to see if this is an option for you.
Major Financial Change
Sometimes unexpected things happen in life like major illnesses, divorce, or significant employment changes. While lenders will sometimes work with you when these changes happen, you have to consider your complete financial picture. If your spouse or partner has a terminal illness, you need to consider whether or not you would be able to afford the home if they pass away. And not just the mortgage payment but the upkeep of the home. Would you even want the home anymore? If you have gotten divorced, this is also a question that you need to consider. In these situations, walking away from your house might be the best financial decision for your family. But again, check with your lender to see if there are options available to you.
Disclaimer: The author is not a financial professional. She does not guarantee the accuracy of the information provided in this article and is not liable for reliance on this information. In using this article, you agree that its information and services are provided “as is, as available” without warranty, express or implied, and that you use this article and the information contained in it at your own risk. You agree that the author has no liability for direct, indirect, incidental, punitive, or consequential damages with respect to the information, services, or content contained in this article.
There are many serious consequences to walking away from your house and it is something that should not be considered lightly. Be sure you understand what those consequences are before you make a decision.
Article Source: http://EzineArticles.com/?expert=Juliana_Montgomery
Well worth the read, picked up this one from one of my favorite news websites:
Good news for California home owners who own a house that is upside down and have more than one loan or lien on title. California Law SB 458 prohibits deficiencies in California Short Sales. What is a deficiency? Stated in plain English a Deficiency is a Short Sale is when the bank comes after the home owner for the amount of money they lost during a Short Sale or a Foreclosure. This was a common practice for many of the banks that required home owners seeking relief through a Short Sale to either sign an Unsecured Note (committing themselves to pay the bank even after they no longer own the home) or the bank “reserved the right to pursue deficiency” after the transaction was closed. The bank would continue trying to collect, even though they approved the short sale. Well that is old news!
Thanks to California La SB 458, also known as SB 458 (Corbett), which was signed into law July 11, 2011 and extends deficiency judgment protection to homeowners completing short sales with junior liens. The law does not require or force banks to approve a Short Sale, but it does require the following three things:
1) it specifically states a short seller cannot be compelled to contribute cash towards the settlement of a junior lien in a short sale,
2) it states that a junior lender cannot require a short seller to sign any further obligations such as a promissory note,
3) it requires all lenders agreeing to a short sale transaction to waive all rights to further deficiency.
The new law expands on short sale anti-deficiency legislation passed last year. Senate Bill 931 (Ducheny) was enacted last year in response to concerns that borrowers could have greater liability after a short sale than after a foreclosure. SB 931 prohibited a lender from obtaining a deficiency judgment as to a first mortgage or deed of trust following a short sale. Since SB 931 only applied to first mortgages, homeowners with more than one mortgage could still be liable to a junior note holder after the short sale.
There are many nuances in short sales, and procedures vary from bank to bank. Internal procedures and systems make some banks much more efficient than others. Of equal importance is to hire the right Short Sale Expert to handle your transaction.
Avoid Foreclosure | | 
December 15, 2011 6:42 pm | 
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