Deficiency Balance & Home Foreclosure Advice

Given the complexity of the financial difficulties you are facing, I strongly encourage you to consult with an attorney licensed in Ohio (and possibly one licensed in the state in which you own property), to discuss the possible consequences of allowing your home to go into foreclosure. An experienced attorney should also be able to tell you what options, such as a loan modification, short sale, or even bankruptcy, may be available to assist you in resolving your mortgage issues. To read more about foreclosure, and the various actions consumers can take to mitigate the damage caused by foreclosure actions, I encourage you to visit the Bills.com Foreclosure page.

You state in your question that you will be unable to make your mortgage payments after twelve months, so unless you are able to sell the home, you may be forced to allow the home to go into foreclosure. When a home is foreclosed upon, the mortgage lender usually auctions the property at a foreclosure sale, applying whatever amount is received at the foreclosure sale to the balance owed on the mortgage. In many cases, the sale price at auction is not sufficient to cover the mortgage and other secured liens on the property, such as home equity loans; the difference between what you owe on the property and what the lenders actually receive is called a deficiency balance. In Ohio, as in most other states, mortgage lenders can pursue borrowers for deficiency balances resulting from foreclosure.

Since you state that you are already "upside down" on the mortgage, it is likely that a deficiency balance will result from the foreclosure on your home, which the lender could attempt to collect. Its collection efforts could range from simple collection calls and letters all the way to filing a lawsuit against you for the balance owed. If the creditor does try to sue you, and if the court grants it a judgment against you, the creditor may be able to garnish your wages, place levies on your bank accounts, and place liens on your property. The lender may also be able to force the sale of your second home in order to pay off its judgment, though it will likely be more difficult for the creditor to seize your second home since the property is located in a different state. In order to execute against assets located in another state, the judgment creditor would need to file a "motion to domesticate" its Ohio judgment with the courts of the county in which the assets are located. Unless the court has reason to believe that the judgment was granted in error, it is likely that the court will domesticate the judgment, allowing the creditor to enforce its judgment in both states. Once the judgment is domesticated, the creditor may be able to force the sale of your property in order to pay off the Ohio judgment.

While it is possible for the creditor to enforce its Ohio judgment outside of the state, you should know that it is relatively uncommon for creditors to pursue the costly and time consuming legal process of domesticating a judgment and forcing sale of property.

Even if the creditor does know about your out-of-state property, you should have ample warning if the creditor is attempting to seize the property, which will hopefully give you time to take the necessary steps to protect your assets. For example, you may be able to work with the creditor to repay the debt to prevent the negative consequences of the creditor’s collection efforts. From my experience, most mortgage and home equity lenders are willing to offer flexible repayment terms to borrowers who have defaulted on their loans. However, if you find that the deficiency balance claimed is too large to pay off within a reasonable time frame, or if the creditor is unwilling to work with you to establish workable payment terms, you may wish to consider filing for bankruptcy protection to resolve your deficiency balance. I strongly encourage you to consult with a qualified attorney in your area if you are considering filing for bankruptcy protection. In addition, I invite you to visit the Bills.com Bankruptcy page.

I wish you the best of luck in resolving the problems you are facing with your mortgage loans, and I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com