Second Home in Foreclosure

I have separate mortgages on two homes. If I walk away from my second home, will it put my primary home at risk?

I have separate mortgages on two homes. The smaller house, which I now live in, is almost paid for and I plan to stay here. I plan on "walking away" from the second home because I cannot sell it because the mortgage is more than the house is worth. Will this have any effect on the smaller house I live in. Can the lender put a lien on the second property? Also, how many years will this reflect on my credit? Please advise. Thank you for your help.

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Bill's Answer
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  • If you allow foreclosure, it is likely your home will be sold at auction.
  • You will have liability for any deficiency balance.
  • Pursue a short sale or deed in lieu of foreclosure to avoid foreclosure.

If you allow your home to go into foreclosure, it is likely that the amount received at auction will be much less than what you actually owe on the home, which could leave you responsible for the difference, generally referred to as a "deficiency balance."

The answer to your question, and the best solution to your problem, depends greatly on your state of residence, as state laws regarding foreclosures and the enforcement of deficiency balances vary greatly from state to state. While some states restrict the collection of deficiency balances, most states allow deficiencies to be treated like all other unsecured debts. If you end up owing a deficiency balance on your second home, it is possible that the creditor may file a lawsuit against you to collect on the debt. If the court grants the creditor a judgment against you, the creditor may be able to garnish your wages, levy your bank accounts and/or place liens on your property, including your primary residence, depending on your state’s laws relating to the enforcement of judgments.

ach state legislature created unique foreclosure and anti-deficiency laws. Follow the links just mentioned to learn the foreclosure rules relevant to you.

For more information about what action creditors can take against you to enforce judgments in your state, see the Bills.com resource Collection laws. Also, if you allow the home to go into foreclosure, you can expect the foreclosure to appear on your credit report for seven years from the date it is entered into the public records, likely resulting in significant damage to your credit rating and your ability to obtain new credit.

As I mentioned, if your mortgage company obtains a judgment against you for a deficiency balance on your second home, it may be possible for the creditor to place a lien on your primary residence. In addition, depending on the laws of your state, the judgment creditor may be able to force the sale of your primary home to obtain the money needed to pay of its judgment. Generally speaking, if an unsecured judgment creditor wishes to force the sale of a home, it must first pay off your primary mortgage on that property; once the sale is complete, it must also pay you your "exemption" amount, which varies from state to state.

You mention in your question that your residence is almost paid off, which I assume means that you have a significant amount of equity in the home. The more equity you have in your home, the more likely it is that the judgment creditor will try to proceed with a forced sale of your property, so if you have a significant amount of equity in your primary residence, you may want to think twice before allowing your other home to go into foreclosure. Before you decide what course of action to take, I strongly encourage you to consult with an attorney in your state to discuss your state’s laws and to determine the best course of action available to you in this situation.

You may be able to rid yourself of the obligation to continue paying on your second home by filing for bankruptcy protection, or pursuing a short sale. If you file for Chapter 7 bankruptcy, you may be able to surrender the property to the creditor and discharge any deficiency balance as part of your bankruptcy plan. However, since it sounds like you have a significant amount of equity in your primary home, you may risk losing that property as well, depending on your state’s property exemptions in bankruptcy. Again, I encourage you to consult with an attorney to determine the best course of action available to you to resolve this outstanding debt. If you would like to learn more about bankruptcy, I encourage you to visit the Bills.com bankruptcy page.

Debt distressing you? The Bills.com Debt Coach is a no-cost online tool that will analyze your debts and show you the options available to resolve them and the costs and benefits of each.

Many Americans are struggling to keep their mortgages current due to the downturn in the housing market and the increased cost of gas and other essentials, so please know that you are by no means alone in the difficulties you are facing.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

82 Comments

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  • 35x35
    Jan, 2013
    Pamela
    We have 2 homes in Virginia. One home (a VHA financed/conventional loan) is a manufactured home with more than $150K upgrades that sits on 27 acres. We have not lived in the home for 4 years (rented it for 2) and have continued to maintain it; payments are up to date and we have made every attempt to sell it (FSBO/currently have an agent). We also have a $50K equity line of credit tied to this home. Our second residence is our primary residence and our choice to move out of one home and buy another was solely based on securing a job. We are not delinquent in either of our home payments. Our primary residence is a VA-financed home. The balance on our 1st home (we'll call it the 'country house') is $143K; equity line is $50K. It has been appraised at $334K. We wish to keep our primary residence and find a way to surrender our "country home with the equity line" without deficiency penalties from the lender/equity lien holder or putting our primary residence I jeopardy with a forced sale. Any advice besides contacting a Virginia attorney and paying for his/her services that will put an even larger dent in our shrinking budget?
    0 Votes

    • 35x35
      Jan, 2013
      Bill
      The facts in your case confuse me, but I think you are saying this:
      • Virginia House 1: Financed with a $143,000 mortgage plus a $50,000 HELOC. It is valued at $334,000, but isn't selling near that offered price. Seek to sell this property.
      • Virginia House 2: Your primary residence. Unknown VA mortgage balance, and unknown value. You wish to keep this residence.
      • You ask, "If we allow a strategic default on House 1 and there is a deficiency balance, can the holders of either the junior or senior mortgage place a lien on House 2 or otherwise place our ownership rights in House 2 at risk?"

      If my interpretation of your facts is correct, here's a very brief and shallow analysis of your situation. Virginia offers minimal anti-deficiency laws that protect homeowners who face foreclosure and a deficiency balance. Virginia's homestead exemption is among the lowest in the nation. When it comes to consumer protection laws, Virginia's legislature has much to answer for to its residents.

      Virginia law allows a judgment-creditor to place a lien on the judgment-debtor's real property. I cannot find in Virginia law if a judgment-debtor-lienholder is allowed to foreclose on a judgment-debtor's primary residence. This is allowed at common law, and is subject to that state's homestead exemption.

      You do not mention the price that you have listed House 1, but one option is to consider a short sale if you need to list House 1 for less than $143K+$50K. Have you discussed a short sale with the servicers of your two mortgages? You may be able to negotiate a deal where any deficiency balance is forgiven.

      Consult with a Virginia lawyer who has real property, mortgage mediation, or civil litigation experience before you sign any short sale-type of agreement.

      0 Votes

  • 35x35
    Dec, 2011
    Christopher
    My father lives in Mississippi, he cosigned a home with me in Georgia. I bought the house for 200k and it's now worth 150k. I can't afford payments on this home now and my father is now retired. He still has mortgage payments on his home. What's my best scenario on getting out of my home in Georgia? I don't think he or I mind a ding to our credit scores if that helps.
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      Your main concern should not be your credit score, rather the negative effects of a default on your mortgage loan. If there is a deficiency balance, then you and your father may be subject to a court judgment and aggressive collection efforts. This may include wage garnishments, bank levies, and liens on your personal property.

      You have a few options. Talk to your lender and work out a short sale or deed-in-lieu of foreclosure, including trying to negotiate an anti-deficiency clause. Also look into one of the Make Homes Affordable programs. Depending upon your situation a loan modification or a loan refinance (possibly a HARP mortgage) might be a suitable alternative to defaulting on your loan.
      0 Votes

  • 35x35
    Nov, 2011
    Madonna
    My husband of 3 hours is filing a BK we live in primary residence that has no equity. I have a condo which paid mtg for 10 years and lived in alone. My problem is loan was purchased in my husband's name. It is my condo and I pay mtg from rents I receive. Can I protect my interest?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      The answer to your question is "maybe." Bankruptcy trustees deal with evidence and facts. What facts and evidence can you provide that the condo you mentioned is "yours" when I assume the property is titled in your spouse's name? Can you show that you purchased it 10 years ago?

      Consult with a bankruptcy lawyer who will research your situation, review the evidence he or she finds, and give you a precise opinion based on your circumstances.
      0 Votes

  • 35x35
    Oct, 2011
    Jay
    I own 4 investment properties in Hawaii and have loans with Lloyd's bank that pegged the balances on the Japanese Yen. Needless to say, the Dollar has lost over 38% value against the Yen and my equity disappeared over the last 3 years. I owe more in every single property than what they are worth now and I am having a hard time keeping them up with mortgages, property taxes, management fees and repairs. I consulted with an attorney and he suggested I file for chapter 7 and discharge my debt entirely but I am concerned about my personal property which I have me and my wife on the note (not on the other 4 investment properties which only have my name on the notes). What do you think is the best course of action and could I exempt my house which has no equity in it? Thanks for your comments.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Jay, I have to yield to your bankruptcy attorney, when it comes to explaining the consequences of the Chapter 7. He should be able to tell you what property is protected and what assets you would be required to liquidate in a Chapter 7.

      I can't give legal advice, but it is my understanding that you can protect up to $30,000 in equity in your primary residence, in a Chap. 7. With no equity, I think the issue you need to discuss with your attorney is how the BK court will view the size of your mortgage payment.
      0 Votes

  • 35x35
    Jun, 2011
    Mary
    My husband was forced to take a retirement package. We cashed out and purchased a condo in Hawaii. We invested the rest of the money with a financial adviser-with the bad economy last year we lost all the money. We had to default on the Hawaii condo and on our primary residence that we own in California. The Hawaii condo is now in foreclosure and the bank is taking it over. My husband got a new job and we have started paying our mortgage again in California and we are working with the bank for a loan modification. We are fearful that the bank in Hawaii will come after us for the loan deficiency and will put a lean on our primary residence in California. Please advise what the current law is in regards to our primary residence in California. Will the foreclosed property in Hawaii hurt our credit in California? We are both over 70 and have a 28 year old son who is unable to work due to emotional issues. Thank You, Mary
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      Before I answer your questions, have you considered a short sale?

      The lender has the right to collect the deficiency balance following a foreclosure. You mentioned you are a California resident. See the Bills.com resource California Collection Laws to learn more about your rights and liabilities as a California resident.

      Regarding your credit score, see the Bills.com resource Short Sale, Foreclosure & Your Credit Score to learn exactly how much your credit score will be impacted by a foreclosure.
      0 Votes

  • 35x35
    Apr, 2011
    Maria
    I have two mortgages and an equity loan that I can't pay anymore since I lost my job. If I stop paying the mortgage and the home equity loan to the bank, do I lose my primary residence?
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      My answer assumes the two mortgages and equity loan you mentioned are on your primary residence. The answer to your question is "yes." As my original answer above tries to explain, if you stop paying any or all of your mortgages, it is possible legally for the lender that is not receiving its payments to foreclose on the property. If it forecloses, part of that process is for your local sheriff to come to your residence and force you to vacate it.
      2 Votes

    • 35x35
      Jan, 2013
      Pamela
      So, what you are saying is, "if the residence is not the primary and it has an equity line" that can no longer be paid because of the economy, the primary residence and personal belongings will not be in peril of being sold/liquidated?
      0 Votes

    • 35x35
      Jan, 2013
      Bill
      Consult with a Virginia lawyer who has bankruptcy experience. I am not suggesting bankruptcy is the proper answer here, but a Virginia bankruptcy lawyer will be well-versed in the nuances of Virginia collection laws.
      0 Votes

  • 35x35
    Apr, 2011
    Sam
    I owned two homes in California, but I lost my job and I had to short-sale my second home. I had first and second loans on the second home. The first loan was fully paid off during the short sale process, but less than half of the second loan was repaid. Now I have debt collectors calling me for the rest of the amount. Can they go after my primary home also in CA?
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      I have three reading assignments for you that will answer your questions about a California foreclosure and deficiency balance.
      1. Read the Bills.com resource California Mortgage Foreclosure Process to understand the mechanics of a foreclosure.
      2. Read Mortgage Foreclosure California to learn how to avoid a foreclosure in California.
      3. Finally, read California Collection Laws to understand what rights debtors and judgment-creditors have under California law.

      As you will see by reading the resources I just mentioned, a judgment-creditor may have the right to garnish your wages, levy your bank accounts, or place a lien on your real property. Consult with a California lawyer to learn if and how to insulate your assets from judgment.

      0 Votes

  • 35x35
    Jan, 2011
    Sonia
    Hi! Your replies to others have been very helpful, so thanks in advance for those! My father lives in his primary residence in Illinois and has a second home in Georgia. He is retired at this point and can no longer afford the second home in Georgia. He is considering letting it foreclose. He is trying to do a short sale, but we are not sure the banks will take it (it has a 1st mortgage of $167K and a 2nd of $55K) and the only offer we've gotten has been $135K. If he lets it go, can the Georgia mortgage holders obtain a deficiency judgment, domesticate it in Illinois and force the sale of his primary residence there, which is nearly paid off? Could a forced sale happen even with the short sale? Most options in terms of dealing with a judgment are doable (letting it sit unpaid as a lien on the Illinois house/working out an unsecured note to pay the judgment, or filing bankruptcy if it came to that), but a forced sale of his only residence would be a definite issue. What is your take on it?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      Sonia, my take on this is that it would be very unlikely that a forced sale would take place on your father's primary residence. I agree that the creditor could pursue the deficiency balance and domesticate a judgment in Illinois, but I feel that it would lead to a lien on his home in a worst case scenario. Try to speak to the current mortgage holders to see if they will accept the short sale, working to get them to forgive any deficiency balance. Be aware of the potential taxes that arise from forgiven debt, if any of his debt is forgiven.
      0 Votes

  • 35x35
    Dec, 2010
    Lorenzo
    We own a primary residence in Texas, and an investment property in Hawaii. The value has dropped considerably and we owe $40,000 more than its worth, and we are losing $500 a month on it even though we have a renter. My wife just lost her job and we cannot afford to keep paying on the Hawaii property. It has a 1st & 2nd lien and neither of the loan companies will agree to a loan modification or short sale. We dont' know what to do. We have some long-term CD's but don't want to use them for the Hawaii property, in case we need them to live if something else happens. Is it better to just stop paying and let it foreclosure; if we do, can the loan companies come after our primary residence in Texas or long-term CD's? Should we draw that money out now before deciding and hide it in a mattress? I'm glad I found this site; this is very stressful for us.
    0 Votes

    • 35x35
      Dec, 2010
      You mentioned you are a Texas resident. Read the Bills.com resource Texas Collection Laws to learn your basic rights and liabilities as a Texan. (Readers residing in other states should read Collections Advice for general rules.) If the mortgagees do not want to negotiate reasonably, then you have no option but to consider Strategic Default.

      Regarding your CDs, if they are IRAs, then they may have a measure of insulation regarding creditor collections. If they are not retirement funds, then they may be subject to account garnishment/levy. Consult with a bankruptcy attorney to discuss protecting your assets. I am not suggesting bankruptcy is an option — it may or may not be — but a bankruptcy attorney will help you understand what steps you can take to emerge from a foreclosure unscathed.
      0 Votes

  • 35x35
    Sep, 2010
    Bill
    Homestead exemptions vary from state to state and apply to a person's primary residence. Maine's homestead exemption is $95,000 for a married couple. This means if your parents' home is worth more than that, then not all of the property value would be protected by the homestead exemption. I believe it is the case that homestead exemptions require a certain number of days residence in the home per year, even if they claim it as their primary residence. Their wintering in Florida may not jeopardize their ability to use a homestead exemption claim, but check and see. I think your idea that a trust may offer protection is worth examining. My best recommendation is to seek the advice of an experienced estate planning attorney that will advise you if your parents establishing a trust is a good idea. You may find it helpful to read the information at Bills.com on how to find an attorney.
    0 Votes

  • 35x35
    Aug, 2010
    Timmeh
    Thanks in advance for your help. My parents are retired and own a summer property in Maine free and clear. They spend winters in Florida and owe about 110K on that house on two mortgages from different lenders. Illness and age have reduced their income. They would like to sell and move in with me or my sister (which is fine). They may be able to sell their house for what they owe, but there is a lot of availability in their market right now and there are no guarantees. Most of all, they are concerned about preserving the property in Maine for their future use and to leave to us. Both mortgages on the FL house are current, but this is not sustainable and they need a contingency plan. They thought they might put the property in Maine into a trust, but perhaps there is a homestead exemption that would better protect them in the event of a default? They are both dependent on Social Security and my mother has a small pension from the state of FL. This is their only income. Any advice is much appreciated.
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    Look into a short sale now. Regarding your foreclosure question and the resulting deficiency balance collection, that is impossible for me to answer because the banks are inconsistent about this issue. Some pursue deficiency balances and sue, and others seem to shrug their shoulders, issue a 1099-C, and forget about it. What your bank does is anyone's guess. I realize that is a useless answer, but until the banks start acting consistently it is impossible to predict their behavior.
    0 Votes

  • 35x35
    Aug, 2010
    Joe
    I recently moved from NC to SC and purchased a new home. I owe around 140K (109 primary, 31 home equity line), but it looks like I will need to go down to around 135K to be able to sell it. If you factor in realtor fees, closing costs, etc... It looks like if I sold it for 135K, I would have to come up with around $17,500 at closing just to sell it, which I don't have. I have already purchased a house in SC, the problem is I have drained my savings waiting for the NC house to sell. What options do I have as far as foreclosure, or short sale? I'm not going to be able to keep making both payments for much longer. Is it possible to convert the second mortgage to a normal loan so that I could repay over time instead of having to come up with the lump sum at the time of sale? If I let the house go into foreclosure, would it be likely that they would sue me for the balance leftover? I don't have any equity in the new house since I just purchased it. thanks
    0 Votes

  • 35x35
    Aug, 2010
    Thomas
    I have a rental property in Panama City Beach Florida and I have missed one payment. If I have to take a foreclosure,can they take my house I live in in Tennessee? If so,can they actually take it and make us move out or can they get a lein placed on it?
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    I am assuming the market value of the property is less than the balance of the loan. The bank has the right to pursue you for what is called a deficiency balance. It would need to domesticate the debt in Tennessee, where a local law firm may be able to garnish your wages, levy your bank accounts, or place a lien on your property. Consult with a Tennessee attorney to learn your specific liabilities.
    0 Votes

  • 35x35
    May, 2010
    Bill
    Generally speaking in Oregon, a deficiency judgment cannot be obtained through a non-judicial foreclosure, but may be pursued when other foreclosure methods are used. The Oregon legislature was active in 2009 and early 2010 in passing laws to protect residents facing or who have completed a foreclosure. I cannot determine the results of these new laws. Therefore, I urge you to consult with an Oregon attorney who has experience in real estate law to advise you of your rights. I realize my answer may not satisfy you immediately. However, I would rather you get an accurate answer from an Oregon attorney than a guess from someone not licensed to practice law in that state.
    0 Votes

  • 35x35
    May, 2010
    Lars
    Hello, We purchased a primary residence in Oregon 3 years ago. 2 years ago I left my Oregon job due to health issues and took a job in California, where my family and I have lived since then. We have not bought a home in California, but are renting a house. We have rented out our Oregon home since we left, but the rent we receive is approx $1000 less than our monthly mortgage payment. We are now considering short sale or foreclosure. We've been told that if our Oregon home is considered a "second home" and not a "primary residence" then the bank will still have recourse to pursue us for the deficiency. Is this true even though our loan is non-recourse? How is "second home" status v. "primary residence" status determined? And who makes that determination? We were also told that the status of the home would not make a difference for a short sale - is this true? Any advice on best course of action? Thank you.
    0 Votes

  • 35x35
    May, 2010
    Bill
    The most viable solutions to achieve your goal of minimizing the impact on your father are Deed In Lieu Of Foreclosure or Short Sale. Also contact Hope Now and review your situation with its counselors. Hope Now is an alliance of counselors, mortgage companies, investors, and other mortgage market participants.
    0 Votes

  • 35x35
    May, 2010
    Troi
    Hello, I currently live in a Georgia in a home that was purchased by my father (with the intent for me to purchase it from him within a few years) who also owns his primary residence in Texas. I have since lost my job, exhausted all savings and am looking for a solution to walk away from this home without the risk of my father losing his home in Texas. Is this possible? We have been unable to receive any help via NACA or other loan modification programs because it isn't his primary residence. Thanks!
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Foreclosure will cause great damage to your father's credit history, and will result in liability for the deficiency judgment, which you can discharge in a bankruptcy. A short sale is a relatively painless alternative. See the Bills.com resource Deed In Lieu Of Foreclosure vs. Short Sale to learn more about these alternatives to foreclosure. See also Mortgage Forgiveness Debt Relief Act and Debt Cancellation to learn how to avoid taxes on forgiven mortgage debt.
    0 Votes

  • 35x35
    Mar, 2010
    Rob
    We live in Virginia. We have two homes, both underwater. We can no longer make payments on the second home, which used to be rented out. What is the best way out of this situation? Foreclosure or shortsale? Bankruptcy? How can we avoid the bak coming after us for the deficiency balance and the IRS with a tax bill?
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Very little in law is absolute, but generally speaking your children are not responsible for your debts. Your creditors cannot attach a judgment against you to your child's property (or your parent, cousin, aunt, nephew, etc.). However, if the transaction is a ruse or sham and was only completed to avoid liability for a debt, a court will not look favorably upon that transaction and may unwind it. In other words, the answer to your question is very fact-based.
    0 Votes

  • 35x35
    Mar, 2010
    sonny
    My wife and I own a primary residence together in Georgia(almost paid for) and a second home (together)in S.C. Once the primary residence is paid for, and I put the primary residence in the name of my daughter, can the mtge.company for the second home come after my daughter for the primary residence equity in the event the second home is forclosed on? We're ok now, but the future is iffy? Thank you for your assistance. Sonny
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    The answer to your question is complicated by the fact that the Nevada mortgage broker may or may not set up the loan and legal instrument as a mortgage. It is traditional in Nevada for residential property buyers and sellers to use what is called a "deed of trust," which is more intricate than a traditional mortgage and what you may be accustomed to in Hawaii. I believe you can accomplish what you seek to do by giving your spouse and friend a quitclaim deed to the Nevada property after you purchase it. Consult with a Nevada attorney, who will be able to ask follow-up questions and research Nevada's laws.
    0 Votes

  • 35x35
    Mar, 2010
    Don
    I am current on my primary home in Hawaii and I am the only one on the deed and the mortgage. My wife and I and a friend are looking at buying a rental in Las Vegas. We are planning to put my wife and friend on title in vegas but I will not be on the deed. I do however need to go on the mortgage. Currently I am in an adjustable rate mortage on the house in Hawaii and i would like to get the loan modified since I am upside down on the loan. If I ended up forclosing on my house in Hawaii in the future would the bank be able to go after the investment property in Las Vegas if I was not on that deed.
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    You do not mention if your missing payments is a temporary financial setback or a systemic problem. If you are suffering a temporary financial setback then work with your mortgage lender on forbearance plan. If the missing payments are due to unemployment or something equally catastrophic, then a short sale is your best option. Foreclosure will cause great damage to your father's credit history, and will result in liability for the deficiency judgment. A short sale is a relatively painless alternative. See the Bills.com resource Deed In Lieu Of Foreclosure vs. Short Sale.
    0 Votes

  • 35x35
    Mar, 2010
    Amy
    My husband & I are behind several months on our mortgage. Due to us being so young & not having good enough credit, my father purchased our house for us; therefore both the loan & the deed are under his name. Needless to say, we've damaged his credit. We're wondering whether the best option would be to let the house foreclose or to do a short sale. We were told that the creditors may come after my father for the the balance & that it could ultimately affect his own home and/or wages. Is there a way to protect my father's home & wages? What would be the best option for us to do?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    If the party renting your property was under contract and broke the contract, then you have a cause of action for their breaking the contract. I do not understand what you mean when you write "our mortgage company did not authorize the lease." I do not understand how the property could have been leased without the property manager's approval. If the property manager did not approve the lease, then who did? Whether the property manager did so without your approval may be significant legally, but I doubt it. Regarding the ownership of the properties, I urge you to consult with an attorney to discuss the ownership of your three properties, and how you can arrange the ownership to minimize your exposure to liability in foreclosure.
    0 Votes

  • 35x35
    Jan, 2010
    nancy
    We live in Michigan and have 2 houses in florida. Both the houses in florida are rental units. One unit is paid for, but the other has a mortgage. We wern't supposed to rent it out, but my husband became ill and our income reduced significantly. The renter has defaulted on the lease and has walked away without paying anything. Do we have the right to sue the renter for defaulting on the lease even if our mortgage company did not authorize the lease? We will now be unable to pay the mortgage and we will default on our contract. Can the mortgage company take our other florida rental house that is paid for. Our house in MI also has a mortgage and we cannot sell it. The house in florida is suppose to be our retirement home. my husband is 71 years old and I am 56 and we don't have anything else paid for except the one house in florida. I'm afraid we're going to lose that house. Is there a way to protect it?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    Hire an attorney experienced in bankruptcy in your state of residence, which seems to be Oregon. Your residence is determined by your intent -- if you intend for Oregon to be in your home and you are domiciled there, it is your state of residence. There are rules for bankruptcy regarding the number of days you must be a resident before that state's exemptions apply. An Oregon attorney will be able to determine which rules apply to you in an initial consultation.
    0 Votes

  • 35x35
    Jan, 2010
    BroncoFan
    I purchased a home in Idaho and later had to relocate to Oregon for a job. After I purchased another home in Oregon, my renter in the Idaho home left without notice. I am currently trying to short sale the Idaho home. Will an attorney in Idaho or Oregon be needed to protect my assets in Oregon?
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    This reminds me of a bar exam question. I think you are on the right track with the deed in lieu of foreclosure. I urge you to consult with an attorney in your state who has experience either in family or property law. Although you provide a lot of facts in your question, I am concerned about some facts that you did not include, such as if your ex-spouse is on the mortgage for your current residence, which is probably not significant but it may be. I am also concerned how the deed in lieu of foreclosure handles your liability in the event of a deficiency balance. An attorney will be able to review all of your facts in light of your state's laws and give you your options.
    0 Votes

  • 35x35
    Oct, 2009
    gilda
    My husb and I and a friend bought a condo together in Maui, Hawaii. We owned 50%, and the partner 50% also, but she is not on the loan papers, only on title. We got divorced and the other partner bought his 25%. My ex- signed a quit claim, got paid for his part as part of the divorce settlement, but the loand was not refinanced.is that the other partner is not on the loan. The partner cannot make payments and I cannot take care of 100%. Can I lose my primary residence because of this? I put the condo for sale, but it has not sold, we owe 174,000. We are behind in payments 7 months, the bank said I could do a DIL, but I have not sent the required paper work. My x called the partner and indicated that a bank closed one of his AMEX cards. Help. We are in a mess!!!
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    Based on the facts you provided, I see no liability for you if the quit claim deed was executed properly and filed with the county clerk. I suggest you consider refinancing to get a deed of trust in your name only. I am surprised your ex-spouse has not insisted on this because this loan shows up on his credit report and plays havoc with his debt-to-income ratio.
    0 Votes

  • 35x35
    Oct, 2009
    Marian
    I received my home through a divorce.I received a quit claim from my ex. My ex-husband and his new wife bought a home in another town. Both homes are in CA. My ex is going to walk away from his home. Both loans are B of A financed. Both loans are in his name only. When the bank forecloses on his home, what can or may happen to my home that I have been paying on now for six years?
    0 Votes

  • 35x35
    Aug, 2009
    Bill
    Oregon is not a community property state. Typically in non-community property states, the debts of one spouse are not automatically the debts of the other. However, to be certain, I recommend you consult with an attorney in Oregon who specializes in family or property law, because each state has its own laws relating to spousal debt. Regarding your options on the condo, a short sale is your best option, and it's unfortunate you have not received any offers your bank likes. Consider bankruptcy. Explain to your lender this is something you are considering, and see if this alters their position the next time you receive an offer.
    0 Votes

  • 35x35
    Aug, 2009
    Janet
    When we got married, I owned a home that is in my name only and my husband owned a home that is in his name only. We live in the home that he owns, and rent out the other property (a condo). However, I am way upside down in the property in my name, and the rent doesn't come close to covering the mortgage, not to mention the exorbitant HOA fees, and repairs, and taxes and insurance. If I foreclose on the property I own, which doesn't have my husband's name attached to it anywhere, will they be able to come after his home, which doesn't have my name attached to it anywhere, just because we are married and we live here? I have had the house on the market for months and have been trying for a short sale, but even that won't work, as the offers we get are so low that my bank won't accept them. If I walk away from the condo, and stop making payments, will it affect my husband's home? We live in Oregon, and the condo is also in Oregon, and we have not even been married for one year.
    0 Votes

  • 35x35
    Jul, 2009
    Bill
    Your brother has nothing to lose and everything to gain by speaking to the mortgage companies and asking for a modification in the terms of each loan. When speaking to a mortgage company, your brother should explain his financial situation and his desire for a lower payment. Some lenders seem eager to work with homeowners. Others are not. He needs to speak to BofA about his situation to learn how flexible it will be in his situation.
    0 Votes

  • 35x35
    Jul, 2009
    C.C.
    My Brother has to homes in Ca, I is his primary and second is a rental property. Second property is emtpy, and he can't afford both mortages. Will the bank reduced his monrtage on the second property, he doesn't want to lose it. His loan for the second property was with Country Wide which is now BofA. Please help with some advise. He was been paying both mortages, but now without any renters. He can't. So he is simply stop payments. on second property. How flexiable are the banks with dropping the monthly mortages? Will they help on second homes?
    0 Votes

  • 35x35
    Jul, 2009
    Bill
    Please see Will Foreclosure On One Property Affect Another We Own?. In general, avoid foreclosure if you can. Yes, the the creditor on a foreclosed home can sue you if there is a deficiency balance. Again, read the hyperlinked article I mentioned for a more complete answer.
    0 Votes

  • 35x35
    Jul, 2009
    Al
    I own two houses but am foreclosing on one of them. Both properties are in California. The property that is in foreclosure has a first mortgage with a home equity loan. Can a judgement come against my primary home which has quite a bit of equity?
    0 Votes

  • 35x35
    Jul, 2009
    Bill
    Mortgages and HELOCs are secured by a piece of real property, so I think it unlikely the lender has an ability to "reach" your California residence without receiving a judgment, first, which would only happen if you allow a foreclosure. Regarding the Washington home, you are a prime candidate for a short-sale. By definition, there is not a deficiency balance on a short sale. Avoid avoid avoid foreclosure if you can! It is much better to have a short sale on your credit report than a foreclosure. Plus, you do not want the lender to have the ability to domesticate any Washington judgment they may have against you in California.
    0 Votes

  • 35x35
    Jul, 2009
    Christopher
    4 and a half years ago, I purchase a home in Washington state. I also have a HELOC on this home. All payments are current and there have been no late payments. Two years ago I bagan renting this property when I relocated to California. A year ago I purchased and now share a home with my parents. Both homes are with the same lender. I am now having problems keeping up with all my mortgage related payments and the upkeep of the rental property. I am considering walking away from the Washngton property. I attempted selling the Washington home before relocating, but it I am now under water with it. The value of the home in California has also dropped in the past year so there is no equity in it. If I let the second home go in Washington, then will the lender likely pursue any deficiency from the Washington mortgage and HELOC against the California home? I do not want to do anything that will adversely effect my parents, who are both in their 80's.
    0 Votes

  • 35x35
    Jun, 2009
    Bob
    Before you start thinking about foreclosure, talk to the lender about a short sale or a deed in lieu of foreclosure. If you have been timely on your payments, you should be able to persuade your lender in agreeing to a short sale. But, if all else fails and foreclosure is the only option, then the lender would have to first win a judgment in CT and then domesticate it in WI. This will be a long and drawn out process. As the debt is now unsecured, you could easily negotiate with the lender for some sort of a payment arrangement, before it gets to the point of them trying to put a lien on your home in WI. Also, they can only put a lien, not drive you out of your home in WI.
    0 Votes

  • 35x35
    Jun, 2009
    Steve
    I live in WI, but own a second home in CT. My credit is good and we have solid income. I have no late payments on either property. However, the second property is significantly distressed and I can't afford to make the repairs. It has been for sale for 10 months with little to no activity. I have a family member currently renting the house. I am running out of options including not being able to get the house insured. If I were to get foreclosed on, can the bank come after my primary home by forcing a sale or placing a lein on my home?
    0 Votes

  • 35x35
    Jun, 2009
    Bill
    It is possible, but the lender will have to go through the legal process and successfully get a judgment against you. Then they would have to domesticate it in MD. It is best if you consult with an attorney and be aware of your recourses well in advance.
    0 Votes

  • 35x35
    Jun, 2009
    Greg
    My cousin and I own a home in Myrtle Beach. He lost his job last fall and can't pay. I've been carrying the load ever since. It doesn't make sense for me to continue paying since the mortgage is more than property value so I've stopped paying in April. Can the lender come after my primary residence in MD?
    0 Votes

  • 35x35
    Apr, 2009
    Sam
    PMI would only cover up to the 20% of equity in the house. NY has a homestead exemption for $10,000, meaning that if there is deficiency on your second home for more than $10,000, the the creditor could potentially sue you in court and ask for a lien to be placed on your primary home. Here is some links to help you understand the role of PMI and the current "crisis" in the mortage crisis. http://www.mtgprofessor.com/A%20-%20...age_crisis.htm http://www.heraldtribune.com/article...20305&tc=yahoo http://www.lodinews.com/articles/200...1ca41f64cd.txt
    0 Votes

  • 35x35
    Apr, 2009
    steve
    I LIVE ON LONG ISLAND NEW YORK AT MY PRIMARY HOUSE. MY TOWNHOUSE IN MYRTLE BEACH WILL GO INTO FORECLOSURE I OWE ABOUT 95,000 ON IT. I HAVE PMI INSURANCE ON IT . WHAT WILL HAPPEN TO MY PRIMARY RESIDENCE.?????
    0 Votes

  • 35x35
    Apr, 2009
    Sam
    Most states strictly regulate what types of loans can be cross-collateralized on a borrower's primary residence, so it is very possible that the cross-collateralization that the builder is claiming on your primary residence is not valid. Even if it is valid, the builder would almost certainly be a junior encumbrance to your first and 2nd mortgages, meaning that the lender would likely be required to pay off your first and second mortgages before it could try to foreclose on your home, making the cost of foreclosure prohibitive for the builder. Bankruptcy may be able to prevent any action against you either by discharging the debt (in a Chapter 7) once the new property is sold and a deficiency balance is determined. A Chapter 13 may help you prevent any creditor efforts to seize your other property by providing you with an automatic stay and allowing you to pay the debt over an extended time. What type of bankruptcy is available to you will depend largely on you income and assets, along with various other factors, so I strongly encourage you to consult with a qualified attorney licensed in your state as soon as possible to help you determine the best way to proceed. I wish you the best of luck!
    0 Votes

  • 35x35
    Apr, 2009
    Ve
    Hello, I purchased a owner build new construction home. In the process the builder required that I cross-collaterized my prim residence as well as my rental properties. The construction home, which just has a construction loan on it is in the process of being foreclosed on and the property value dropped. My primary residence has a 1 and 2nd mtg on it so there is no equity and the rental properties have no equity in them. Can the lender of the construction loan try to foreclose on any of the other properties and will filing backruptcy help stop it. Lastly can the construction lender step in front of the 2nd place lein holder on the primary residence
    0 Votes

  • 35x35
    Apr, 2009
    Bill
    A lot depends on the the state laws that deal with deficiency balances. Creating an LLC might circumvent that problem, but its not as easy as just creating one and then buying a home. You would have to show that the LLC has funds enough to invest in the home and a reason to do so as well. At the end of the day, you cannot game the system, you have to deal with the consequences of the investment decisions that you make.
    0 Votes

  • 35x35
    Apr, 2009
    Ed
    Is there a way to prevent a deficiency balance being exercised against my primary residence (which I own free and clear) if I purchased a second home and then find that I am unable to pay for that second home? For instance if I lost my job and then found that I couldn't pay for the second home and had to forclose? Would creating an LLC and then purchase the second home work?
    0 Votes

  • 35x35
    Mar, 2009
    Bill
    Celia, it is possible that you may get a judgment that would place a lien against your primary home. Generally a creditor with a judgment must enforce a money judgment against property of the debtor through execution. The judgment itself does not give the creditor any interest in the debtor's property. The creditor remains unsecured until it obtains an interest in the debtor's property through the execution process. If the judgment creditor is unaware of the nature and value of property in which the debtor has an interest, the judgment creditor may obtain a court order that the judgment debtor appear in court for an examination about assets, may conduct Lexis or WestLaw asset searches, or may hire experts specializing in the discovery of assets.
    0 Votes

  • 35x35
    Mar, 2009
    Celia
    I can't find anything that makes sense to me for the sate of California. We are thinking about letting our second home go, because we can't aford the payments any longer and the renters are on unemployment. Both homes are in California. Can they get a judgement against my primary home?
    0 Votes

  • 35x35
    Mar, 2009
    Sam
    If you "walk away" from your land in Utah, the worst case scenario would be that the lender forecloses, obtains a judgment against you for the balance not covered by the foreclosure sale, and then domesticates its UT judgment in California. Domesticating its UT judgment would allow the creditor to execute it judgment against your assets in California. While it is somewhat unlikely that the creditor will take this relatively drastic action to collect this debt, I would encourage you to try to work something out with the creditor rather than simply "walking away." For example, if you put the property on the market for less than you currently owe, the lender may agree to cancel the portion of your loan not covered by the sale proceeds. If you are forced to walk away, you may be able to file for Chapter 7 bankruptcy protection after the foreclosure sale is finalize. A bankruptcy filing may be able to discharge any deficiency balance after the foreclosure sale. Most people consider bankruptcy as a last resort, but it is becoming more and more necessary for consumers given current economic conditions. I wish you the best of luck in resolving this hardship.
    0 Votes

  • 35x35
    Mar, 2009
    Cheryl
    I own my home in California outright. I have a lot that I purchased in Ivins, UT for $200,000. I owe $150,000. I can no longer afford to make the mortgage payment on this and the newly increase HOA which is $240 per month on the empty lot. I have used everything in my savings. What will happen if I walk away?
    0 Votes

  • 35x35
    Feb, 2009
    J.
    My husband and I currently own a home in Michigan that we are trying to sell. Unfortunately like everyone else, the value is much less than what we owe. A year and 1/2 ago, my husband and sister in law inherited a home from their parents (in Michigan also) that they co own together. If we file bankruptcy or go into foreclosure, will they come after the inherited house? How does it work as it is co-owned?
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    When a person files bankruptcy, the creditors, the trustee and the court have a right to know everything of value to which the filing person has a claim. As far as the co-owned property is concerned, the law looks only to the value of the debtor's share of the equity in an item if it is co-owned. Many times clients present their attorney with the idea that something inherited should not be listed as an asset. Unfortunately, the fact is bankruptcy law views inherited assets as a windfall, and do not give any breaks for assets that were inherited. In fact, if you should inherit something up to 6 months after filing your bankruptcy, whatever is inherited becomes subject to your bankruptcy (property of the bankruptcy estate). Consult with a bankruptcy attorney to learn what your state exemptions are and also to figure out how to deal with the inherited property.
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    Sounds like you need to talk to an attorney, but the quick answer is that unless you cross collaterized the two homes, then they won't necesarily go after the Michigan home if you default on the Florida home. They can try to collect on the deficiency balance on the Floriday home, such as suing you and obtaining a judgment and then trying to put in place a levy, lien or garnishment. You CANNOT get fixed income garnished (social security payments). Talk to an attorney though.
    0 Votes

    • 35x35
      Jul, 2011
      Jane
      We are in a similar jam. We live in our 2 family home in Massachusetts, the tenants are moving as of aug 1st. We barely make the mortgage on this house monthly because my husband is retired. We have been denied refinancing, and have tried to sell with in the last 3 years. We do however have a second home in NH and can afford that mortgage which was refianced with in the last 7 yrs. We'd like to just cut our loses on our 2 family and move to the NH house because that mortgage is manageable. Can they go after the pension or NH home?
      0 Votes

    • 35x35
      Jul, 2011
      Bill
      Massachusetts is a recourse state. That means that the lender has the right to come after you for the unpaid balance on a mortgage loan. If you owe more on the home than it will sell for, then you are likely going to be on the hook for the deficiency balance, the difference between what you owe and what it sells for.

      If you have a deficiency balance, it is possible for the lender to sue you and for your income, bank accounts, and assets to be at risk.

      I strongly urge you to speak with an attorney, before you proceed. Maybe you can negotiate a short sale or deed-in-lieu of foreclosure? You should also consult with a tax specialist, to discuss the tax implications of mortgage debt forgiveness, if your lender forgives any of your debt.
      0 Votes

  • 35x35
    Jan, 2009
    H.
    we have a home in Michigan which has a 4 year mortgage on it, and a refinanced home in Florida which we want to walk away from---appraised at $135,000---be lucky to get $70,000. Can the mortgage company put a lien on our Michigan home--both mortgages are from same company--does business in both States---can they go after social security payments of annuities, or pension funds???
    1 Votes

  • 35x35
    Jan, 2009
    Bill
    That really depends on the state laws with respect to deficiency balances. Most states will allow wage garnishment, but the lender can also place liens on your existing home. All this can only happen if the lender files a suit in court and manages to win a judgment against you. You should seek the advise of an attorney, who will be able to better advise you about your options, depending on your state laws.
    0 Votes

  • 35x35
    Jan, 2009
    nicole
    i purchased a new home in my name only but the old home was purchsed by both my husband and myself which is going up for foreclosure. Will they take my current house for deficiency judgement if the debt is not settled after foreclosure sale?
    0 Votes

  • 35x35
    Dec, 2008
    Bill
    I don't think that you can stop the foreclosure at this point. You should have done it before the foreclosure proceedings took place. As far as filing for a Chapter 7 or a Chapter 13, that will depend upon you passing the means test. Bankruptcy is a serious issue, and you should always consult with a qualified bankruptcy attorney before you proceed with anything.
    0 Votes

    • 35x35
      Dec, 2010
      Anon
      This Site is VERY pro-Bank. Realize that there are several laws in place to protect the homeowner. You are not alone!
      0 Votes

    • 35x35
      Dec, 2010
      Bill
      Thank you for your comment. Bills.com tries to inform homeowners of their rights and potential liabilities equally. Each state has its own rules, and the information above is an overview of the general rules. Homeowners facing foreclosure should consider consulting with an attorney in their state to get precise legal advice about their rights. For example, Nevada offers a foreclosure mediation program that can help silver state residents avoid foreclosure. Use a search engine to see if your state offers a similar program.
      0 Votes

  • 35x35
    Dec, 2008
    Casie
    My husband and I own a home together. Our house has been foreclosed on and the sale is soon. Can I file chapter 7 or 13 to get the sale stopped without him filing bankruptcy. Also, I have just gotten childcare and am trying to get a job quickly. Can I file chapter 13 or do I have to file 7?
    0 Votes

  • 35x35
    Sep, 2008
    Sam
    Once the foreclosure of your husband's second home is complete and the property is sold, he may be left owing a deficiency balance, which is the difference between what he owed on the home and the amount for which the bank sold the property. In today's housing market, in which housing prices have dropped precipitously in some areas, deficiency balances on foreclosures can be quite high. If a deficiency balance is created by the foreclosure of your husband's second home, the creditor could file a lawsuit against him and obtain a judgment for the amount owed. If it obtains a judgment, it may be able to place a lien on your current home. However, Florida law generally does not allow judgment creditors to force the sale of a debtor's homestead, so your home should be safe in that regard. You may need to file a homestead declaration with your county recorder's office. Since I am not licensed to practice law in Florida, I cannot provide you with legal advice. Consult with an attorney in your area to discuss your financial situation and determine what the potential consequences of the foreclosure of your husband's second home could be. An attorney will tell you specifically what actions, if any, you may to take to protect your assets from this creditor.
    0 Votes

  • 35x35
    Sep, 2008
    Maria
    My husband and I purchased a home a few months ago. I am the primary owner on the mortgage deed. He is going through a foreclosure on a home he purchased a few years ago with an old college buddy, he is the primary owner on the mortgage deed for that home. Being that he is the secondary home owner on our mortgage and is going through a foreclosure on the home he purchase with his buddy can this affect our current home? Can the bank force a sale on our home if a lien is placed on him? We live in Florida.
    0 Votes