Thursday, February 4, 2010

Sued - After A Foreclosure

The Minnesota Home Ownership Center's network of Housing Counselors (Foreclosure Counselors) has begun to see an uptick in lenders seeking deficiency judgments AFTER a foreclosure... and, without getting too technical in this blog post, we felt it was important to warn struggling homeowners and our partners about this new trend:

A deficiency judgment is “a judgment lien against a debtor, defendant or borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full.”

In plain English: a homeowner can be sued for the difference between the amount the bank received when they auctioned off the house at the Sheriff’s sale, and the amount of the outstanding mortgages.

Minnesota is a ‘Non-Recourse’ state. This means that FIRST lien holders CANNOT seek judgment (cannot sue) former homeowners for outstanding funds. HOWEVER... any “Junior” lien-holders CAN. If there is more than one mortgage on the property – or if there is a line of credit or HELOC taken out against the property – THOSE lenders CAN sue the former property owner for payment of any outstanding debt!

Here’s a realistic scenario:
  • If a homeowner purchased a $200,000 home in 2005 and financed the purchase 100% using an 80/20 loan (80%, or $160,000 financed with one lender who holds first lien position, 20%, or $40,000 financed with a second lender who holds second lien position).
  • Now, given current market circumstances in Minnesota, the home may only sell for $150,000 at the Sheriff’s Sale.
  • The first lien holder (who was owed $160,000) is wiped out. The homeowner does not owe this first lien holder any additional funds, and the first lien holder CANNOT sue the former homeowner for the ‘deficiency’ of $10,000. ($160,000 - $150,000).
  • HOWEVER… the second lien holder CAN sue the homeowner for their ‘deficiency’. In this scenario… they can sue for the ENTIRE outstanding amount of $40,000. (To keep the math simple, we’re assuming that no principal was paid down in the last 5 years).


If the lender seeks a deficiency judgment, the former homeowner may find themselves having their wages garnished, tax returns withheld or garnished and other consequences.

Here’s the kicker - - - lenders can take up to THREE YEARS SIX YEARS after the Sheriff’s Sale to decide whether or not to seek judgment! THREE.YEARS. SIX.YEARS. (!)

Former homeowners may find themselves being sued for outstanding mortgage debt YEARS after a foreclosure... just as they begin to rebuild their financial lives.

Jennifer Lancour, a Housing Counselor at PRG, Inc., one of the organizations that work with the Minnesota Home Ownership Center to offer Foreclosure Prevention Counseling, stated recently:

We’ve always counseled clients about the possibility of Deficiency Judgments in situations where there is more than one lien on a property. But in the past it was unlikely that a lender would seek judgment. Since the middle of last year, we’ve started seeing more and more clients coming back to us after a foreclosure looking for assistance because they’ve been served court papers.
In addition, Homeowners also need to be EXTREMELY careful when negotiating a SHORT SALE on their property as well. If the negotiations aren’t done properly, even the FIRST lien holder can seek judgment for any deficiencies.

The MN Home Ownership Center has a helpful fact sheet on its website about deficiency judgments (with MANY thanks to the Housing Preservation Project for their work!). You can download the fact sheet here.

Deficiency Judgments are just ONE of the MANY considerations struggling homeowners need to think about when facing a possible foreclosure. If you, or someone you know is struggling with mortgage payments... don't wait until it's too late. To find your local non-profit, FREE Foreclosure Counselor, click here. For additional information about preventing foreclosure in Minnesota, click here.

53 comments:

  1. What will the lenders do if we don't have any money for them to go after. We lost it all trying to hold on to the house.

    Blood from a stone.

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  2. Anonymous: One of the reason's we posted about these Deficiency Judgments is to inform homeowners about the time frame. You may be in a tight spot economically today... but two or three years from now your situation may have changed. And the lender may wait FOR your situation to change. Just be aware.

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  3. How about the lender's sharing in the loss of value in the home? Many times people can't sell their home bcz they owe too much and the lender wouldn't agree to a short sale.

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  4. The amount bid on the home at Sheriff sale is not the amount that should be used in this analysis. The price the home actually sells for, after the redemption period in a foreclosure, or the amount of deficiency in a short sale are the amounts that matter. NO money actually changes hands at a sherrif sale to pay any of the lenders, it is merely a legal proceeding.

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  5. Pete,

    Thanks for the comment! Just to clarify: The price the home sells for, after the redemption period has ended, only affects the party holding title. In other words, if the first lien holder forecloses… and no one redeems, at the end of the redemption period, all junior liens are wiped out… and their only recourse is to seek a deficiency judgment. If the first lien holder (now title-holder) sells for MORE than what was bid at the Sheriff’s sale (AFTER REDEMPTION)… the profit is THEIRS and does not have to be shared with any junior lien holders. First lien holders, even if they lose money on the sale (either at the Sheriff’s sale, or in a subsequent REO sale) cannot seek judgment in Minnesota.

    All of this pertains ONLY to “Foreclosure by Advertisement”… the most common form of foreclosure in Minnesota.

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  6. The debt needs to be paid and settled in full. Exploring a bankruptcy while you own the property, understanding the Mortgage Forgiveness Act of 2007 (extended in 2009), and discussing your situation with the IRS at 1-800-829-1040 which is the free helpline number. Another resource is the irs.gov website. Obviously, paying the mortgage is the best option. But if you can't, then you need to understand all options on the table and the legal and tax consequences of each choice.

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  7. I just ran into an odd situation at a legal clinic. The homeowner was foreclosed upon and there was a Sheriff's Sale on December 11, 2009. Okay fine--the homeowner knew he was in default and assumed he had 6 months to live in the home before he needed to move. On December 17, 2009 the homeowner is sued by the bank that held the original loan seeking to void the Sheriff's sale and any record of it because (it claimed this in one of the factual counts in the civil complaint) that neither the bank nor the homeowner were aware of the possibility of MHA assistance. What does anyone thing is going on here? Was the original foreclosure action flawed in some way and this is a way to undo the damage and bring another foreclosure action? or is the bank under some federal requirement (via financial bailout rules) to a self-imposed moratorium on foreclosures? or is there really some MHA monies available that creates some kind of win/win with the bank and the homeowner?

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  8. Anon 10:16am:

    Thanks for your comment. While not common, it's not unheard of for lenders to negate/reverse a Sheriff's Sale - even if they are not participating in MHA. If they ARE participating in MHA, the lender is supposed to put a hold on the foreclosure sale while the account is being reviewed for MHA - IF the homeowner requests it.

    This may be a situation where the lender is actually doing right by the client by reversing the Sheriff's Sale to give the borrower another chance at a MHA modification.

    Your comment about the homeowner being sued to reverse the sale is NOT as easily explained. Contact me here at the center: ed@hocmn.org... and I'll try and connect you to someone who may be able to dig a little deeper. THANKS!

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  9. Thank you for providing a great resource to Minnesota homeowners. Your website and blog are very informative and helpful!

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  10. When they talk of garnishing wages, are they only able to garnish a percentage? Do they work with you first so you can try to make some payments? I have a family and this is my biggest fear is that we are going to be homeless because of wage garnishment. We are in the foreclosure process. The lender has refused to work with us on all accounts.

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  11. Anonymous... yes there is a cap on the percentage that wages can be garnished. For help with garnishments & financial counseling, visit the Center's website here: http://hocmn.org/en/creditRepair.cfm

    If your are still in the foreclosure process... we recommend that you speak with a Foreclosure Counselor as quickly as possible. And be careful who you work with! There are lots of less-than-reputable operators out there.

    Thanks for the comment.

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  12. Yeah, I owe $20k on a second mortgage to TCF. I offered them $4k, if they would release their mortgage and discharge the remainder. Then, I could pursue a DIL with the first mortgage. But, they refuse. If the place goes through foreclosure, they will likely get NOTHING, as the property has dropped substantially in value. WAY TO GO TCF!!!!

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  13. I have heard recently, that Jr. Liens, referred to as purchase money loans are NOT able to sue for "deficiency" judgements. My understanding of a purchase money loan is a subordinate loan used to purchase the property, like the 80/20 example that you used above. Is that correct?

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  14. i live in minnesota and i'm about to loose my home its my 1st morgage i have bing in my home for 14 years,, if i walk what could happen to me ?

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  15. ECN: "If you are still in the foreclosure process... we recommend that you speak with a Foreclosure Counselor as quickly as possible. And be careful who you work with! There are lots of less-than-reputable operators out there."

    I'm just starting the process of seeking referral for a free consultation regarding foreclosure. Where do I turn? I only have a 1st mortgage so I now understand I won't have a deficiency judgment. I have other questions on process, whether I need an attorney if it's a strategic default, whether I'll be taxed on the loss, etc. Thanks for your help!

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  16. --Association fees - when do i stop paying?
    --Property taxes and H.O. insurance are in escrow. Do i make separate payments or simply just cancel H.O. insurance once I'm officially foreclosed upon?
    --Am i taxed on the loss? If so, when?
    --How long can i expect the process to take from the 1st time i miss a payment?
    --Will the lender be able to come after me for the loss if i only have one mortgage on the house?

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  17. Yes I was wondering my sister-in-law has passed away two yrs ago she left a townhouse in Minnesota with a mortgage left on it it will probably go to foreclosure shortly no money left in estate to pay for it.Can the bank come after her siblings and what if siblings do not have funds to pay it back?

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  18. I have a weird one for you. What happens if the Sheriff sale nets more than you owe? Our house was auctioned on Tuesday. We owe $360,000 and it sold for $403,000. Does this mean we are due monies or is this all just paper shuffling to get money out of the bailout?

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  19. Anonymous (4/23 10:04):

    Your question was new to me... given the current housing environment in Minnesota. I checked with our legal partners at the Housing Preservation Project (www.hppinc.org) in order to get an answer for you.

    I have some good news... and some bad news.

    The short answer to your question is that yes, when there is a surplus the borrower receives the surplus.

    The bad news, however, is how the word "Surplus" is defined in Minnesota:

    Before a surplus is established, there is a list of entities that take thier cut BEFORE the homeowner:

    1. The cost of the foreclosure sale is covered,
    2. All late payments are paid (with interest),
    3. Any taxes and insurance are paid,
    4. The remaining amount of the first mortgage is satisfied,
    5. Then any junior lienors get paid (HELOCs, lines of credit, second mortgages, etc.)

    If at this point there is a surplus, then the borrower gets the surplus.

    Given the few details you shared in your comment... I would guess that there will be little or no 'surplus' left.

    Thanks for your comment/question. I'll be turning this into a blog post on Monday, with links to the Minnesota Statutes that outline these provisions.

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  20. Thanks for the info. We won't be getting any surplus. We haven't made a mortgage payment since last April.

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  21. I have a question i keep getting told by friends at work that 1st home mortgage you are protected in minnesota that you can walk away from your home and they can only take your home even if the mortgage company takes a loss on your home???can they sue me??? i have never gone though this before, also i was told if I file bank rup that they can't touch me is that true too???? I just don't know whats real and whats not,,so please if you can help me that would be great, I just want to be safe.my home needs alot of work alot. the mortgage company told me if they help me it's just going to be enogh just to afford the payments.putting me at a hard spot,,this house will only stand for a shot time house roof shot ,,pluming very bad,,i could go on but to much to list,,so i thought about giving up the house,,,times are very hard for me, thanks for your time, please let me know what i should keep an eye out for

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  22. Anonymous (5/4 4:16 am)... It can be really hard to separate fact from fiction in a foreclosure situation... you may read one thing in the paper, and hear something different from a friend. The ONLY source of RELIABLE information is your local FREE Housing Counselor. They'll be able to look at your entire situation and tell you all of the possible pitfalls of walking away... or staying, if thats what you decide. Please visit: http://hocmn.org/en/foreclosurePrevention-map.cfm to find YOUR local counselor.

    Good luck!

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  23. My father recently passed away and I was unable to make any more payments so I signed the title to the manufactured home over to the mortgage company for a property in Minnesota. I am the only remaining relative and the only individual on the will. Do I have to worry about the mortgage company coming after me since I am not on the note and never resided there? There is only a 1st mortgage in existence. In reading the above it appears since Minnesota is a non-recourse state I am safe. Is that true or did I read that incorrectly? Thank you.

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  24. Anonymous 5/25 @ 9:52am:

    Given the information you've shared, you've read the post correctly and you're PROBABLY not liable, as you were never on the note or mortgage, just the title. However... we highly recommend that you speak with an attorney that specializes in Real Estate issues... as your question goes beyond the normal scope of the work of the Center our our Counselors. There may be some additional questions regarding HOW the manufactured home was financed (traditional mortgage or consumer debt). Thanks for reading our blog!

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  25. Hi, we have a weird situation and need HELP, pls! When we bought our house in 2004, our mortgage guy got us an 80/20 loan w/ two different banks (Citibank= 1st and TCF=2nd). A few years later, we joined a credit union, and they said, "oh, we can take over your jr loan w/a better rate, and give you a HELOC". We needed furniture, paint and wanted to fix up the house. We said "Great"...Now we are divorced, STILL own the home 2gether, and need to SELL, but it's not moving. So, $45K of the $70K HELOC was transferred over from TCF, and I know HELOCs are generally recourse loans if we come up short. Q: IF we have to foreclose OR Short Sale, is the ENTIRE HELOC recourse? Or just the $25K we tacked on later? Can the credit union come after us for the whole amount? Thank you.

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  26. Anonymous 7/7 @ 3:29:

    Generally ANY junior lienholder can seek judgement for ANY outstanding amount. Given the details you've shared... it is possible that they could seek judgment for the entire HELOC amount. If you're thinking of selling the property short... remember to work with a Real Estate agent that has EXTENSIVE experience in this arena... they may be able to get the junior lienholders to release both liens and debt. Before making ANY decision that might have such drastic repurcussions... we suggest you consult a Real Estate attorney about your situation.

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  27. I am getting separated from my wife. The current home I live in I will not be able to keep up with the mortgage by myself. I have placed the home for sale but for the price of my remaining balance I have not had any offers. I have considered forclosing because it will head that way. My question to you is. Have you heard of anyone ever contacting the lender and the lender reducing the mortgage amount to where the homeowner is able to remain in the home?

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  28. Anonymous 7/9 @ 4:53pm

    What you're referring to is known as a loan modification. There are circumstances where the lender may reduce your interest rate, extend out the term (time) of the loan, and in some (albeit rare cases) even reduce the principal owed on the mortgage. You can certainly connect with your lender yourself (there's a tip sheet available at the Center's website here: http://hocmn.org/en/fp-factsheets.cfm) but there is also a network of FREE non-profit housing counselors that are available to help with this process as well. To find your closest counselor, visit our website here: http://hocmn.org/en/foreclosurePrevention-map.cfm.

    Best of luck, -ECN

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  29. I bought in 2005 for $200,000. Now my mortgage is about $139,000.

    I have a second mortgage (HELOC?) that I took out for purchase money with the same bank at the time of purchase. I paid this off, but the credit line is still open. It is about $30,000 that I could write myself a check for tomorrow.

    Can I cash out the credit line and stop payment on the house? This seems like a more profitable plan than selling the house for a low price and paying the real estate agent fees.

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  30. I have a junior lien holder suing me for the amount of the lien without even attempting foreclosure. The house is in the process of a short-sale and we have kept this lien holder in the loop throughout so this suit came as a surprise. They had seemed willing to work with us on the short sale. Any suggestions?

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  31. Does anyone have experience with TCF bank as the second mortgage holders during the short sale process? We are hoping they well settle with a cash offer to release the debt and the lien. We moved away from MN three years ago when my husband, after losing his job, found employment in Texas. We decided the best thing to do would be to lease option to buy the house out and hope the market would turn around in 2-4 years. We had 10% down in the house but it had already depreciated. It was the wrong decision to lease/option the home as we have exhausted our life savings through repairs and missed payments by tenants. Over the last three years while trying to save our MN home we have exhausted our life savings. We did all of this only to find ourselves in this terrible predicament. The good news is that we have a contract for a short sale on this home, and it is approved through the first. TCF/second lien holder has been dragging their feet. We have offered a cash offer and US bank has offered monies as well. WE have asked for lien release and release from debt. The redemption period ends at the end of this month. We have tried to get MN attorneys to help us but because we are in TX they haven’t been open to advice us. We had to stop paying on this home september 2009. It would be nice if TCF would follow the home affordable forclosure alternative with the cap of 6k on the second.

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  32. My husband and I are separated and I'm left with a home i can't afford to pay. I'm thinking of letting the house go. I have 80/20 loan ( 1st mortgage is 234k and 2nd mortgage is 52k). My questions is:

    -When I stop making the payments, when will my house go on foreclosure (how many months of missing the payment)?

    - Once my house is foreclosed, can I try to work payment plans with 2nd mortgage so they won't sue me for deficiency judgement?

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  33. Hello-

    I'm thinking of doing a short sale on our home. We have 80/20 loans. I don't know the process of it. My questions is when can we started processing on the short sale once we stop making payment?

    How long can we stay in the house while the estate agent negotiate with the lender on the short sale?

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  34. I want to buy a house that has a 2nd mortgage with US Bank. The owners are not behind in payments but the value of the house has dropped $100,000 since they purchased. They are trying to negotiate a short sale. What does that mean to me as the buyer? I know that the short sale process may take months. Is there anything else I should be aware of besides paying more than market value? The buyer is asking me to do a house inspection prior to short sale approval to show the bank that there would not be any inspection issues that would derail the sale. Is this wise?

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  35. Anonymous 11/13 @ 2:32,

    A home inspection is ALWAYS recommended for purchasers - for your OWN protection... the current homeowners want the inspection done prior to approval so as to not slow down or stop the sale once the bank has approved (and they have to start all over again).

    You DEFINITELY want to conduct an inspection - and the sooner the better. Make sure you are working with an ASHI member, and, as always... get everything in writing.

    Make sure, as well, that YOU are working with a Real Estate agent that has extensive experience purchasing and selling 'distressed' (short-sale) properties.

    If this is your first home purchase... we also recommend you take a HomeStretch workshop (http://hocmn.org/en/buyahome.cfm) or speak with a HomeBuyer Counselor.

    Best of luck!

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  36. After researching this issue, I feel this article is a little misleading as it implies that the second mortgage must collect based upon a deficiency judgment.

    If the first mortgage forecloses (even if it's foreclosure by advertisement), and the second mortgage is not paid off (which is likely), the second mortgage can collect based upon the originally signed promissory note. Furthermore, the second mortgage (or HELOC) has 6 years to collect based upon the breached promissory note.

    This article implies that the second mortgage collects based upon a deficiency judgment, and as far as I can tell, that's just not the case. I'm also unsure where they come up with the "3-year" period. A citation to a statute would be appreciated.

    I really like this blog and return every few weeks to see what new articles are up. Please keep up the good work!! And a response would be appreciated!

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  37. Anonymous 12/21, 10:18am,

    You are correct... the length of time in Minnesota to decide to seek judgment is six years. (Post changed to reflect this). We have the correct info on our fact sheet (Available here: http://bit.ly/dWatdh).

    On the other point... we emphasize that lenders are beginning to seek judgement more often to help homeowners understand that, unlike other collection efforts with unpaid bills, homeowners may find themselves having their wages garnished, tax returns withheld, etc.

    Thanks for your comments!! So glad you find value in our blog. Keep commenting to keep us on our toes :-).

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  38. I purchase a house with a friend in 2003 for $220K. We had an 80% (Lender is GMAC)/20% (lender is Wilshire) subprime loan with an arm and never refinanced. Due to the friend’s lost of employment we couldn’t keep up with the payments. We foreclosed in early 2007. The house sold at a REO auction for $40K. Since it was 4 years ago I can’t recall if it was foreclosed by advertisement or by judicial. Is there any way to find out after the fact? During the foreclosure process in 07, I got a letter from the second mortgage stating that they want payment in full. I called the second mortgage (Wilshire) and told them I could not pay that amount. I ask what will happen and they said they may or may not collect. On my credit report it show a foreclosure on the first mortgage and charged off for the second. I never received anything from the primary mortgage for 1099 or anything to file with the IRS. Should I call the primary mortgage or the IRS? I don’t want to get in trouble with the IRS too.

    I cut off all my credit cards and now I’m living on cash with a budget. But my credit is still shot and I’m living in fear that the second mortgage will sue me any day now. I’m scare to buy a car or anything a lien can be put on. Is there anything I can do? Should I be contacting a lawyer? If so what kind? Should I contact Wilshire and try to negotiate a payoff amount? I’m afraid they might say no and demand payment in full. Also would contacting them reset the 6 year statue of limitation for debt? I’m also thinking of moving to Wisconsin which has a 10 limitation on debts. How would that impact my situation? I really want to move forward and close this chapter in my life. Please help!

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  39. Anonymous @ 8:04PM,

    The questions you raise are GREAT questions... and before you re-connect with either of your original lenders, we recommend that you speak with a certified credit counselor about the debt and credit issues. Luckily, here in Minnesota, there are two non-profit organizations that not only offer credit counseling services, but also offer foreclosure prevention counseling services and will be able to answer post-foreclosure questions as well. They are:

    - LSS Financial Counseling Service ..... 1-888-577-2227

    - The Village Family Service Center ..... 1-800-450-4019

    Best of luck!

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  40. We are 50K underwater - our mortgage is 190K with Wells Fargo Home Equity. We refinanced in 2005, Wells paid off the original loan (also with Wells, paid off amount 135K) and gave us the 200K loan at a higher interest rate - 8%. Husband has been out of work 7 months and just got hired in a western state; we are 30+ days behind -- we don't want to stay in our house, or sink more money into any needed repairs, so there isn't any point to a loan mod. If we walk away will we still be liable for the HELOC if WFHE advertises? We are not really sure how this works since it's not really a second and we pay one mortgage payment to WFHE. Thank you.

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  41. My primary residence (bought in 2001) was sold via Sheriff sale in Aug '09. Redemption completed in Jan '10. On 3/4/11, I received a 1099-A from Wells Fargo bank. Why did this come in the mail so far past the Jan31 deadline for tax records. My 2010 income taxes have been filed. What am I suppose to do with this 1099-A?

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  42. I have one mortgage on a $135,000 condo. It is probably worth $40,000 from what I've seen of other one bedroom condos. My HOA is not fixing a water problem in the basement. I am extremely allergic to indoor molds. I cannot force them to fix the water problem--I have called the city, the state, etc. and no one will help. The only way I can do this is if I sue, which I cannot afford. We had an ASHI-certified inspector inspect the house--he missed a ton of problems. Can't afford an attorney to sue him. We must leave. I am sick every day and allergy meds barely touch it. I get infections at least once a month.

    My husband makes about $90,000. I am disabled and make about $4,000 though I do not collect disability--I just do a little freelancing now and then. We have one car paid off, 10K in the bank, and about $1200 every month after necessities. What is the likelihood that BofA will pursue a judicial foreclosure? Please help. We don't have a lot of assets, but we do have monthly money. ~Cally

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  43. Anonymous @ 6:43pm:

    If you have only one mortgage, they cannot sue for deficiency in Minnesota. Please see our fact sheet: Deficiency Judgments (lawsuits) After a Foreclosure, you can find that here: http://hocmn.org/en/fp-factsheets.cfm.

    However, before making a decision based on a blog post - no matter how reliable the information :-) - you should speak with a Foreclosure Counselor just to be sure. Especially in a Condo situation, there may be other issues with the HOA, etc.

    You can find your local FREE non-profit housing counselor here: http://hocmn.org/en/foreclosurePrevention-map.cfm.

    Best of luck,
    MN Home Ownership Center

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  44. Has anyone commented on the post from August 2010. I am in a similar situation. I still have an substantial amount available on my HELOC. Currently have $40K against the HELOC and still another $60K available. I had also considered drawing completely down on the HELOC. I would also be willing to pay the $60K back if I were to write a check to myself just have the cash available for negotiation. I just want to have some options rather than facing a foreclosure or deficiency judgment and have absolutely not funds available to me when I will be in the same situation either way. One other point that I must mention is that I moved to Canada so I would assume the garnishment of wages would be harder although not impossible. Do think the lender would go after someone out of the country. I have been trying to do the right thing for three years now but now I am at the "crossroads".

    Here is the original post from someone else back in August:

    I bought in 2005 for $200,000. Now my mortgage is about $139,000.

    I have a second mortgage (HELOC?) that I took out for purchase money with the same bank at the time of purchase. I paid this off, but the credit line is still open. It is about $30,000 that I could write myself a check for tomorrow.

    Can I cash out the credit line and stop payment on the house? This seems like a more profitable plan than selling the house for a low price and paying the real estate agent fees.

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  45. I had a Town home that was foreclosed back in August 2010. I paid 293,000.00 - 80/20 loan. I also took out HELOC about 40K.
    I live in CA now and the TH was rented for 2 years prior to its foreclosure. My husband is in the title, but not in the loan. I am the one who bought the house. I have no job now, but my husband works. Our bank account and tax is done together. Can they come after me for the any money? Or worst, can they garnish his income or come after him to collect money diff?

    Thanks,

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  46. I have a question, please give me some answers.
    I bought my townhome in 05 for 200k with 80/20 subprime. I rented it out last year and I bought a bigger house because my family grew and I needed extra bedroom. My renters didn't pay me and moved out finally. I couldn't find new renters to cover the expense. I went for short sale. I have an offer for 122,500 my first lender agrees with no deficency, my junior mortgage is 33,000 they were offered 3,000 from first mortgage and we agree to pay them 4,800 but they decline and they want 20,000 dollars minimum, with 2,000 dollars on closing and 55 dollars a month for couple decades, no other negotiations.
    What should I do now? Should I go to foreclosure or there are some other ways to settle this?

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  47. I'm not sure if this site is still being updated, but I was curious about something and every time I search for answers online I keep seeing this website pop up.

    My workplace is closing down and moving 1000 miles away. The company is transferring us all but many of us are underwater on our homes. Some of us bought at the wrong time but others have owned their homes for 10-15 years and recently refinanced to use the extra cash for things like home upgrades, cars, or just plain spending money. We all have 1st mortgages and there are no 2nd loans on the properties.

    This issue is that many of us are seriously underwater, to the tune of $40-100k and many coworkers are talking about simply walking away from their homes rather than sell it and have a huge bill due at closing. Is it really that simple? If a person is making $70-80k a year and they have a house in MN can they just walk away from their primary mortgage without fear of being sued for the difference of the loan? No one cares about the hit on their credit but no one thinks they can be sued for the difference as they only have one mortgage loan on the property. Will MN lenders really permit taking such a huge loss on the loan if the homeowner still has a good paying job?

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  48. I have heard about the Mortgage Forgiveness Debt Relief Act of 2007 and how ex-homeowners are receiving a 1099 for the difference of what the house sells for. Is this standard practice now? If I understand things correctly, if someone lets their house get foreclosed on and it sells for (example) $50,000 less than what the existing mortgage was, they may receive a 1099 for the difference. Is this correct?

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  49. Foreclosure by advertisement and redemption period completed November 2012. Lender has since sent me a letter allegging I owe appx $16,000 for cost to appraise the property for foreclosure, legal fees and the rest unspecified. Am I liable for these? In fact the Lender bid $9000.00 more than outstanding mortgage at Sheriffs sale

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    1. Anonymous 1/23/13... If a property is foreclosed by advertisement there *generally* is no obligation for the borrower to pay any of the outstanding expenses... however there are several exceptions. I encourage you to contact a Homeownership Advisor to discuss your particular situation. Visit www.hocmn.org to find your local provider.

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  50. I have been repeatedly told to walk from a house we own in mn, we are currently under water by 50k, but we also have 3 rental properties totalling 150k in equity plus I have about 30k in inheritance coming in the next six months. i only own 50% of the rental properties and they are owned by an LLC. our house has a 40k 2nd mortgage which is why its under water mostly, all loans are through a local lender and in house. is there any way they wouldnt go after me if I just dropped the keys off to house one day?

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  51. @Anonymous July 8,

    Be VERY careful before walking away from a property with a second mortgage in Minnesota. Your first mortgage cannot seek a deficiency (we are a non-recourse state), but your second, and any subsequent or junior lienholders can. Each bank will decide if there is a cost/benefit to seeking judgment after the foreclosure. Before walking away... speak with a Homeownership Advisor that specializes in Foreclosure Prevention to understand the risks involved. http://www.hocmn.org/foreclosure-prevention/find-a-foreclosure-counselor/

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