Mortgage deficiency

Foreclosures
14yFollow

Mortgage deficiency

Vivian Jackson
Saint Louis, MO · Member since 2012 · 4 posts · 0 votes

Live in STL, Mo, house is in Jax, FL. Had to move due to layoff in 2009 from Jacksonville. Due to many things, I'm now behind in payments (have renters) but there is always something wrong (air conditioner) for repairs. I've yet to receive a full months rent unfortunately. As of March 1, I stopped paying the mortgage. The bank says I will have a mortgage deficiency of 48-60k. I bought the small 1500 sq ft home for 179k in Oct of 2007. I think I have 12k in equity this was a 100% finance. I had an offer for 85k for the short sale. The bank said this morning they are still deciding on what to do (which means they will probably take the short sale, compared to foreclosure)

But how can I get out of the mortgage deficiency? Or can I? I can't pay back this huge amount that they want. There is no way. Can they garnish my wages? I don't' have any assets, two cars that I'm paying for, I bought another house in March of 2011 for way cheaper (this time if one of us gets laid off, we can afford the 750/mnth payment) How can they come after me other than a collection agency? what are my options? I have a lawyer picked out in Florida, but I just don't know what to do. Can I just not pay it and it goes off my credit after 7 years? It's either that or I claim bankruptcy I guess. I'm really at a loss, so I'm looking for some ideas from the group here.

thanks

0Reply
13 views

Most Popular Reply

J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y

Everything Bill and Joel said above, but keep one more thing in mind -- you'll still be on the hook with the IRS for taxes on the deficiency amount. If you're not an owner occupant anymore, you can't get around that (that I know of).

Podcast Guest on Show #2024
1Reply
See this reply in the discussion

10 Replies

Jump to latestLatest
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    In a short sale you can negoiate the deficiency away as part of the deal, have your attorney take care of that. Bankruptcy is sometimes an option after foreclosure and they know that. If you have a written lease on the property the lender will have to honor that for up to 6 months if the go to foreclosure,so that's a down side for them.

    Get with your attorney! Good luck...

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    It's a called a "waiver of deficiency" letter and do not close without it.

    Do not believe anything the bank says unless it is in writing.

    You also have to know which department you are talking to.You can get conflicting information depending on if you are talking to customer service,collections,loss mitigation,the short sale department,bankruptcy department,and the foreclosure department.

    In big banks these are all separate but in some local to regional banks one person might be handling multiple departments.

    They will all look at it differently with various goals in mind for the the loan file.

    Who is on the previous house loan just you or your husband as well??

    Who is on title for the current house??

    Obviously if they pursue a deficiency they can't collect if you are below certain federal income guidelines.

    You can always file chapter 7 if you pass the means test and blow out all the bad debt except for some IRS taxes,some student debt,and back child support.

    No legal advice

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    I hope in your listing agreement you had a provision where you are not obligated to go through with the sale unless the lender gives a waiver of deficiency approval letter before closing.

    If not the buyer could try to force the sale.You might want to have an attorney review your documents to see where you stand in everything.

    Podcast Guest on Show #47
    NNN Invest53 Reviews
    WebsiteView Page
    0Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    14y

    Everything Bill and Joel said above, but keep one more thing in mind -- you'll still be on the hook with the IRS for taxes on the deficiency amount. If you're not an owner occupant anymore, you can't get around that (that I know of).

    Podcast Guest on Show #2024
    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    Very true, the forgivness of debt is income!

    0Reply
  • Vivian Jackson
    OP
    Saint Louis, MO · Member since 2012 · 4 posts · 0 votes
    14y

    hi -- it's me again. -- It's through a credit union there locally. So I've been dealing with one person this whole time. I'm the only one on the house in FL. My husband and I are both on the deed on this STL house, but financial wise (i had better credit) so the loan for 2nd house (which is now our primary) is all in my name. We have only had it for a year, so there really isn't that much equity in the home. I know about chapter 7. I make too much (barely) we have a son.

    "I hope in your listing agreement you had a provision where you are not obligated to go through with the sale unless the lender gives a waiver of deficiency approval letter before closing"

    This was said by a man above. No, I don't believe I have that. And the bank (local credit union there) has told me that I will have a mortgage deficiency. They just told me yesterday that they will want to see my bank statements and 6 months of paystubs again. Which is fine. Originally they were trying to help us (supposedly) through the loss/mitigation which is the same guy I've been talkign to, and it was taking so long, I finally called a realtor in hopes to short sale it. I wasn't sure what else to do.

    I'm talking to the Florida lawyer on Monday to see if he can help me negotiate with the credit union this 48-60k mortgage deficiency. Otherwise, I'll have to do a Chapter 13 I guess. Kind of crazy, I still have a great credit score, but won't after that.

    I appreciate all the advice on here. I'm hoping it will work out.

    Also- yes I'm aware of the taxes I will have to pay to IRS for the forgiveness of debt (if that happens) it is seen as income. I'd rather pay taxes on that though, than the entire amount. Just burns me up inside.

    Thanks again everyone. Great advice for me.

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    14y
    Originally posted by Vivian Jackson:
    ... And the bank (local credit union there) has told me that I will have a mortgage deficiency. They just told me yesterday that they will want to see my bank statements and 6 months of paystubs again. Which is fine. Originally they were trying to help us (supposedly) through the loss/mitigation which is the same guy I've been talkign to, and it was taking so long, I finally called a realtor in hopes to short sale it. I wasn't sure what else to do.

    ...

    They will want your financial info to approve the short sale, but they will also USE that financial info against you (to see if there is anything they can get by chasing the deficiency).

    0Reply
  • Vivian Jackson
    OP
    Saint Louis, MO · Member since 2012 · 4 posts · 0 votes
    14y

    I see. Well we don't have a health plan right now, so I guess I should get one. We have maybe 300 mnth left over, but I had to defer my loan payment for school because of all this. I lost my job back in January and found another one but it doesnt' pay as much. Not that the bank cares about any of that.

    just cracks me up, at how things end up. I figured that's why they were looking. Good luck on getting anything is what I say.

    If I could move to another country. I would. I have a passport, but there really is no where I can immigrate to.

    0Reply
  • Jackie Patterson
    Real Estate Investor · Kalamazoo, MI · Member since 2010 · 681 posts · 241 votes
    14y

    You can definitely negotiate the deficiency with a local credit union. I just got a $42,000 deficiency reduced to $6000 payable at $50 a month over 10 years for a seller. Just be sure you get it in writing as part of the approval.......BEFORE you close. You may find it easier to have someone else negotiate on your behalf. It can be hard when you're personally involved. If you already have an attorney involved they could probably do it, or perhaps the listing agent could work on your behalf.

    0Reply
  • Vivian Jackson
    OP
    Saint Louis, MO · Member since 2012 · 4 posts · 0 votes
    14y

    That would be great if that happened for me like it did you on the much lower amount. I will definitely get it in writing, the lawyer that I spoke to gave me some pointers, but in the end I asked him to represent me if possible. For which is said he would. My main goal out of all this is NOT to claim bankruptcy. I guess it's good that it is a local credit union. I hope it works out. Thanks again.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free