Although a foreclosure may seem like one of the worst events you can face as a homeowner, the nightmare may not end with the lender’s sale of your home. In the aftermath of many foreclosures, many borrowers learn that a discrepancy exists between the home’s sale price and the amount owed by the borrower to the lender. This is called deficiency exposure.
Deficiency exposure is computed by deducting the value of the collateral property at the time of the sale from the total debt owed by the borrower to the lender, calculated by including all costs, advances (such as for taxes and insurance), attorneys’ fees, etc., which the creditor expended. Under current Florida law, the creditor has one year from the finalization of the sale (the statute is unclear as to whether that counts from the issuance of the certificate of sale, or the certificate of title, which comes later) to pursue a deficiency judgment against the borrower when there remains a deficiency exposure after the sale of the home.
A lender can pursue collecting the deficiency exposure through a deficiency judgment granted by the court. This can happen simply by the lender filing a motion in the current foreclosure case, which would only need to be served to you by mail at your last known address. The lender can also try to collect a deficiency exposure by obtaining a deficiency judgment through filing a new lawsuit against you. This seems to be a popular trend in the real estate market right now, as there are many cases being filed in order for lenders to collect deficiencies. In a majority of these cases, infamous lender Fannie Mae has sold its deficiency claim rights to debt buyers, who are pursuing the borrowers for payments, treating it as part of the vicious debt collection process.
If you are undergoing a foreclosure or are concerned about foreclosure, it may be possible that your lender is able to continue to come after you if money is still owed after the sale of the home. If you end up with a deficiency exposure, you do have options available to you. First, you can defend yourself against the lender’s claim. Certain events, such as a creditor’s refusal to mitigate damages via a short sale, modification or deed in lieu of foreclosure, would be material to that defense and may assist you in fighting the claim for a deficiency judgment. Another option may be for you to file bankruptcy in order to discharge the deficiency exposure. In many cases, bankruptcy might be the cheapest and most definitive solution in the right situation, but comes with another set of issues.
Before taking any action, it is best to consult an experienced attorney who can analyze your specific case and suggest alternative defenses or plans of action. The foreclosure process is one governed by a strict timeline, so the sooner you consult with an attorney, the easier it will be to set a course of action. Do not wait for your creditor to make the first move against you. Prepare yourself for any possible attack against you and your home by having an attorney on your side.
Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.
Over the next few years, millions of homeowners must somehow find a way to face this previously unforeseen HELOC reset problem and resulting payment increase. Though some may be able to handle a larger payment, there will still be an enormous number of homeowners who will find themselves in a financial crisis because of the HELOC contractual trap. If you think you may be one of the many homeowners who will be prey to an upcoming HELOC payment increase, there are some things you can do to help handle the situation.
First, if you are not sure whether your loan is one that will be subject to an upcoming payment increase, take a close look at your agreement document. Look for the dates pertaining to the Borrowing Period and the Repayment Period, bearing in mind your contract might use slightly different terminology. When you have confirmed the date when your HELOC will reset, you need to determine the new payment schedule, including principal. Many lenders are sending notices well in advance to warn consumers about the pending payment increase. If your lender has not yet provided you with this information, then you should be able to determine the new payment from the contract terms and the help of a loan or mortgage calculator. Don’t be afraid to call your lender about your reset payment either, as they can easily provide you with this information.
Once you determine what your reset terms are, you have options with how to manage the payment increase. For some homeowners, an increase from $250 to $500 per month is manageable. If you are able to fund the new payment, it may be better for you to pay the increase while you can in order to avoid the likely credit damage posed by some of the other plans.
If you are one of the many who cannot afford a higher payment, you are not without recourse, though some of your choices may be less attractive than others. One route you can pursue now is arranging a loan modification with your HELOC lender before the payment increase takes place. You could also modify your first mortgage and apply the savings to your payment increase. A more dramatic option involves stripping the lien imposed by the HELOC reset via a Chapter 13 bankruptcy. Before taking any action, please be sure to consult with an experienced professional who can warn you of the potential risks of trying to work around the HELOC payment increase.
Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.
Although the home equity line of credit (HELOC) has been around for many years, it gained popularity in the early 2000s. Far fewer HELOCs are being issued by lending institutions today due to the 2008 financial crisis, but millions of homeowners still have this type of arrangement, and are in for a shock when these HELOCs reach their 10-year reset points in 2015-2016.
While there are many different types of HELOC agreements, a common arrangement is the 25-year contract, with a 10-year borrowing period and a 15-year repayment period. This means that if you received a HELOC in 2005 that followed this structure, and borrowed $50,000 on your house this whole time you’ve been paying interest-only at 6%, which is high compared to today’s rates, but since you are only paying interest on the principal balance, the payment is still manageable at only $250 per month.
At the end of your 10-year borrowing period (which would be this year, following the 2005 example) the line-of-credit feature of the HELOC will expire and the payments will then increase during the repayment period to cover repayment of the principal balance (plus ongoing interest). At a 6% annual percentage rate, the $250 per month payment will suddenly spike to just under $500 and remain at that level until the $50,000 is paid off (assuming you have a fixed interest rate).
Even worse, some HELOC products were set up for a total contract duration of 15 years, which just entails a 10-year borrowing period followed by only a 5-year repayment period. This short period of time to repay principal means that the monthly payment in the above example would increase to $967 after the reset, which almost four times the original payment!
How could such a seemingly terrible program gain such popularity? When HELOC and similar financial products were designed, they were based on the crucial assumption that real estate values would continue to rise, which would allow qualified borrowers to refinance to more favorable terms within a few years. However, the financial climate has remained stagnant, meaning that the HELOC reset is going to be a bigger problem than initially imagined. The steep plunge in real estate values has left millions of homeowners unable to participate in traditional refinancing programs, leaving them vulnerable to a major payment shock when their HELOCs reset in 2015 and beyond. Since so many HELOCs were issued in 2004 through 2008 compared to prior years, this HELOC reset crisis will potentially hamper America’s continued housing recovery for years to come.
Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.
When homeowners borrow a mortgage loan to purchase a property, they sign both a mortgage (or deed of trust) and a promissory note. The promissory note (not the actual mortgage contract) is the document that contains the promise to repay the amount borrowed from the lender. The owner of that promissory note (Note) is the only party that technically has the legal right to collect the debt owed on the property if you don’t make payments.
If a homeowner has fallen behind in making payments to a lender, the lender does not necessarily have to own the Note to file suit against you. The holder of the note is also able to initiate a foreclosure proceeding. However, assignments or blank endorsements are required for a Holder of Note to have standing to foreclose. If the lender potentially pursuing a foreclosure against you only holds the Note, you may be able to defend your case if they cannot produce the proper assignment documentation or blank endorsement.
Assignments of Note track transfers of the servicing of the loan as well as ownership. If the Holder of Note cannot properly establish the assignment or endorsement, they may not have standing to pursue the foreclosure as they lack the ability to prove ownership interest in the property (remember, the owner is the party that is able to initiate a foreclosure, but if they have given ownership interest to another party, that party can also sue the homeowner now, as long as the documentation is proper). Even when the Holder of Note does not provide clear assignment or endorsement, they may still be able to sue for the debt on the owner’s behalf in the State of Florida, so it is important to have an attorney involved in matters concerning Holders of Note.
Potential foreclosures are one of the times that you need to seek professional counsel to help you navigate the precarious situation. Even the smallest risk of losing your home isn’t worth taking without having an attorney who regularly handles foreclosures assist you in fighting to save your home. If you are concerned about possible foreclosure proceedings, call now to speak to a qualified, experienced real estate attorney who will be able to evaluate your case and help you determine the best way to approach your particular case.
Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.
If you are sued for a sum of money that you may owe a creditor and lose the case, the prevailing party will be granted a judgment. That party may then file a judgment lien, which is a lien that attaches to your real estate. When a creditor files a lien against your property, the lien attaches to the property title. If you sell the property, you must pay off the lien before you can receive any of the sale proceeds.
However, creditors can recover the debt you owe before you sell your home and any lien holder can force your home into foreclosure if you do not pay the debt. In foreclosures, lien payment procedures are considerably different than lien payment procedures in private sales. In a foreclosure, a lien’s priority is typically determined by its recording date (though some liens, such as property tax liens, have automatic superiority over essentially all prior liens). First mortgages are usually recorded first and therefore are in the first lien position. The first mortgage is generally then considered the superior or primary lien holder because it was the initial lien on the property.
When a superior lien holder forecloses, it does not have to pay off any “junior” liens. Junior liens are any claims filed after the superior lien holder’s claim. A second mortgage or subsequent judgment liens, for example, are considered junior to the primary mortgage. After the foreclosure, all junior liens are cleared from the home’s title. Although foreclosure clears junior liens, it doesn’t remove liability for those debts. After foreclosure, the former junior lien holders will often pursue other collection methods to recover the debt you owe. In some cases, the creditor may try to attach a new lien to property you own, like your car, and seize that property.
Additionally, any lien holders can initiate foreclosure themselves regardless of lien priority order. However, even though a junior lien holder can initiate a foreclosure, the foreclosure proceeds must still follow a particular distribution plan. “Senior” liens are paid before “junior” liens (those with lower priority), so the junior lien holder must use any money received from the foreclosure sale proceeds to pay off creditors who hold liens superior to its own before it can apply the money to the debt owed by the homeowner. Further, the junior lien holder who initiated the foreclosure must distribute any additional funds amongst the junior lien holders according to each lien’s priority order.
Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.
