Can I give the house back and not lender come after me for judgements issue. House is Florida and no longer live there.

Kim

———

Hi Kim,

That would be a deed in lieu of foreclosure and if that is the foreclosure avoidance strategy selected then that should be negotiated with the lender.  Simply deeding the property to the lender does not guarantee that the lender will provide a full release to the borrower or even that they will accept the deed.

Deficiency judgments are pursued by lenders in Florida – it’s case by case.  For example, here is an example of a deficiency judgment in Pinellas County Florida.  The lender can either make a motion for deficiency within one-year of the foreclosure sale without having the borrower served again – or bring a separate action for the deficiency after one year.

The deed-in-lieu is treated by lenders as a foreclosure for mortgage underwriting purposes.  I’ll add that another option that is superior to the deed-in-lieu is a short sale.  A successful short sale with full release of liability is preferred to a deed-in-lieu because it can settle the debt with a zero balance and is generally not viewed as a foreclosure by originating lenders.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

I’m just beginning the process of short sale, and have a buyer and contract, with verbal agreement of interest of both primary and secondary lenders to proceed. But now I’m looking into the whole “full release of liability” issue. I’m in Florida, which I understand is NOT a non-recourse state. So, I’m online searching for advise, and hopefully, some worded examples how to proceed.

I’ve learned a lot from what I’ve seen here (negotiation the “full release” and perhaps the credit agency “settled” language; but the concepts are still at a general level to me. Any (non-attorney) council for me? Or better yet, a resource where I can find the language for the “full release.”

My broker, who is a bit of specialist in short sales doesn’t seem to think this is necessary (which tells me he’s not the full specialist that I had hoped.) My deficiency amount will be $183k short of the $393k purchase price; and I don’t want this coming back on me.

Thanks for all your help

Don

———–

Hello Don,

Just make sure you get the estoppel letter in advance of closing and read it carefully.  And make sure you avoid this situation.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

First off, many thanks to you for providing great insight and information on your blog!!

By following your “words of wisdom” I am in process of completing an approved short sale in which the lender has agreed to allow a full release of liability, a trade line entry of “Settled” (with no further language), and a zero balance.

My question is regarding the “Charge Off” listed (in their letter below). Does the “Charge Off” solely mean they will be writing off the loss in regards to tax filing? Or does it have other ramifications?

Do you have an idea of how this overall scenario (including the charge off) will affect credit and how long will it remain there?

Thanks again for being a “guiding light” for many of us!

Bob L.
Las Vegas

Copy of letter from lender follows:
Yes, we are agreeable to report “Settled” to the credit repositories without further language.  However, due to the large loss the Credit Union will be taking, due to our agreement with you not to pursue any deficiency balance, we will need to charge off the remaining balance on your Home Equity Line of Credit after the settlement.  When that transaction occurs, “Charge Off” will show on the Credit Report, although the amount due will show as “$0.00” as we will not be pursuing any recovery.

—————

Hello Bob L. Las Vegas,

You’ve done a great job.  Aside from having the lender remove the tradeline, what you’ve negotiated is the best that can be accomplished. 

The only other part I might add is that some time after the short sale closes and you’ve run your credit report, examine it closely to see whether or not there is an error.  Both the Fair Credit Reporting Act dispute process and the Real Estate Settlement Procedures Act Qualified Written Request can be used to clear up any errors.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

A: You get a 90% off sale at Saxon!

Payoff on July 25, 2009 is $150,031.37

Payoff on August 31, 2009 is a mere $15,680.62

And the borrower gets a full release of liability.

I went through a bad divorce that ended with a foreclosure and a deficiency judgement of $90000+.

Would like to purchase another home in a couple of years and I am eligible for a va loan, but the judgement has to be paid or being paid on. The judgement is joint with ex and i can not afford to pay 1/2 of it nor all of it. 

Should I go ahead and file bankruptcy and try to repair my credit immediately. 

The wait for a va loan after foreclosure is 3 years and 2 years after bankruptcy discharge.

Rachel

———-

Hi Rachel,

I’m not an attorney and can’t advise you on filing bankruptcy.  I am thankful for your post because millions of borrowers are facing foreclosure at this time and many are unaware that a deficiency judgment may be possible (depending on state law and other circumstances). 

I would advise you to talk to a bankruptcy attorney about your options.  For others who find themselves facing foreclosure – please be proactive and look at the option of selling as a short sale and obtaining a full release of liability upon closing.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

In re: The case discussed at:
http://www.brokencredit.com/anatomy-of-a-florida-foreclosure-defense/

While doing some research, I checked the Duval County docket on this case and noticed some additional pleadings;

 9/15/2008     MOTION TO COMPEL (PLAINTIFF’S)
 9/17/2008     MOTION FOR EXTENSION OF TIME TO RESPOND TO PLAINTIFF’S REQUEST FOR DISCOVERY
11/21/2008     MOTION TO COMPEL

As you notice, there has been no activity on this case since November 2008.

I was wondering if you have kept up with this case, and if you have obtained the additional pleadings on this matter.

Also curious as to your thoughts on why there is no recent activity on this case.

Thanks,
Curtis

————–

Hello Curtis,

No, I haven’t kept up with the case.  The case was chosen because it was discussed in April Charney’s Foreclosure Defense Seminar for Continuing Legal Education for the Florida Bar last year. 

My opinion on why the case has little activity is the fact that the lender/plaintiff’s foreclosure case is so weak, they don’t want to press the issue and tip their hand for all to see, so one filing per year keeps the judge from dismissing the action but that’s about it.  I would guess it will end in a nice settlement for the homeowner.

And that brings me to another point and that is: there has to be a ‘goal’ of foreclosure defense.  Ultimately, there will be a settlement and the borrower needs to determine in advance what type of settlement will make it all worth it.  Who wants to be in limbo for years on end awaiting the disposition of their foreclosure case?  Stuck as a pawn in a game with creepy lenders and a judicial system that more often than not (unfortunately) favors those with money.

(typing as my mind plays an old Kenny Rogers Song – “The Gambler”)

The quicker a borrower gets through it and obtains a principal reduction loan modification or a short sale with full release of liability, the better.  Our minds have so much that weighs heavily on our brain already as things are in life and we can otherwise focus that energy on some things more productive.  That’s all just my opinion of course. 

Thanks for the questions and hope this helps.

Paul

(singing)

You got to know when to hold ‘em, know when to fold ‘em,
Know when to walk away and know when to run.
You never count your money when you’re sittin’ at the table.
There’ll be time enough for countin’ when the dealin’s done.

Do we have any recourse in this situation?  We are now trying to get out of the house by way of short sale, we owe $129,000 and the home is valued at $40,000.  We need to move to pursue work opportunities in other parts of the country.

Thanks for your help!
Melissa

————

Hi Melissa,

I’m not sure about recourse since you are short selling with those numbers.  Let’s look at short selling FHA. 

A PFS is the FHA short sale program which is also known as the Pre-Foreclosure Sale.  Per HUD ML 2008-43:

“A PFS sale must be an outright sale of the property.  If a foreclosure occurs after the mortgagor unsuccessfully participated in the PFS process in good faith, neither the mortgagee nor HUD will pursue the mortgagor for a deficiency judgment.”

Also, the FHA PFS program allows a borrower to get a $1,000 check at closing. 

A $1,000 check and a full release of liability sound like a nice exit out of a property that has a 322.50% LTV.

Thanks for the questions and hope this helps.

Paul

For Pinellas type ‘clerk of court Pinellas County’ into Google and then click ‘Official Records’ and then type in your name and ‘lis pendens’ or whatever you’re searching for.  All counties in Florida work similar, so you can type in ‘Clerk of Court’ and your county into Google for any county in the state.

If there is an active foreclosure case against you, then you can check that online too by clicking ‘Civil Records’ at the Clerk’s site in your county and then enter your name and click search.

This has been a public service message from your friends at the Broken Credit Blog.

(we now continue with our previously scheduled programming)

For Pinellas County Lis Pendens Short Sale Solutions Call Paul Jerome at 727-688-3779 or 727 688-3779 so that this phone number is indexed in Google and now you’ve reached my site and by the way, that’s my picture to the right.  So, call me and let’s talk about a full release of liability on a short sale.

After almost one year we are upside down in the home (value $150K, owe $210K). We starting to struggle. 2nd mortgage will not subordinate for a refinance, even though they are discharged and have no equity position. We are unable to keep up on badly needed repairs, etc., and definitely will fall behind if rates rise.

We have decided to give back the home (we’ll have no liability due to the BK). Wondering if we should do a short sale to prevent a foreclosure on our credit reports, or if it matters. 1st has not reported to credit reports in a year, but second has been reporting current payments, even though we have had lates (are they allowed to report after BK when not reaffirmed?).

We are going to stop making all payments to 1st and 2nd to save for a new home, possibly starting short sale process soon. Will we be able to buy a more modest home in 1-2 years? We will rent until then.

Casey

——–

Hi Casey,

The second mortgage should not be reporting any payments after the bankruptcy was filed.  The payment history up until that point remains, but not after.  The tradeline should list as ‘included in bankruptcy’.

Fannie Mae requires a forty-eight month wait after a bankruptcy to obtain a new Fannie Mae loan while FHA requires a borrower wait two years.  There’s also the issue of the deed-in-lieu or short sale.  FNMA differentiates between a short sale and foreclosure or deed-in-lieu and permits a short seller borrower to buy again with another FNMA loan in two years.  FHA, however, does not differentiate between the two and would require a three year wait.  So, given the circumstances, it appears you’ll need to wait three years to obtain another FHA loan.

In my opinion, a short sale with full release is better than a deed-in-lieu any day of the week.  If the bankruptcy was discharged then only a full release is appropriate for a short sale.  Completing a short sale can keep the public records entry of foreclosure off a credit report and in turn be less damaging to the credit score.  When there are two mortgage loans, a deed-in-lieu is generally not an option.

Thanks for the questions and hope this helps.

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

Finding someone to answer this question has me thinking maybe I should just bang my head up against a wall for a while.  I just might get more accomplished. 

I have a question regarding a short sale that seems simple enough but no one (all three credit agencies and my bank) can give me a straight answer. 

I short sold a home in 2008.  I was short by 82,000, which my bank wrote off and issued a 1099 for. 

My question is this…why are they still reporting a balance owed and late payment history?  If you could tell me, or direct me to someone that can answer this I would be extremely grateful. 

Thank you,
Stephanie

———–

Hi Stephanie,

Take a look at your estoppel letter.  Does it make a reference to the credit reporting?   If it does, then you have your answer.  If it doesn’t (and most don’t) then you need to read between the lines as follows:

If for example it states ‘full release of liability’ then it should generally report as ‘settled for lesser than amount’ and a zero balance and there should be no late payments after closing.

Or if for example it was a ‘lien release only’ then it might be accurate to continue to list a balance and late payments.

I wish more sellers would read the Broken Credit Blog and more real estate agents would Estoppel The Insanity.  Also, read: My HELOC Follows Me

Thanks for the questions and hope this helps.

Paul