Loan Loss Mitigation Video #5
Loss Mitigation Legal Situations
Hi, I’m Nevada Loan Loss Mitigation Specialist Damian Falcone and this is part 5 of the loan loss mitigation plan video series. In part 4 we went through some of the comparisons you can make in evaluating your situation and today we will be going over some legal situations you should consider.
Today we will be covering the subjects of Foreclosure and Deficiency Judgments. We go through each of these subjects in more detail in their respective series and we recommend you watch them if you haven’t already – These will be some quick points to help you understand some possible outcomes of your loan loss mitigation plan.
An understanding of the Foreclosure process should be part of everyone’s loan loss mitigation plan. Foreclosure is the process in which a bank or other secured creditor sells or repossesses a parcel of real property (such as a home) after the owner has failed to comply with an agreement, typically a 'mortgage' or 'deed of trust'. Simply put it’s when a bank takes your house -
You should assume the Foreclosure process will proceed regardless of your behavior. This means if you are trying to work something out with a bank – they will most likely continue moving forward with a Foreclosure. Foreclosure proceedings can be postponed but you will need to get confirmation of the delay and as always keep great records.
Foreclosure requires the secured creditor (in the case of a mortgage – usually a bank) to send a notice of default; notice of trustee sale; and if an agreement can’t be met, an eviction notice. Historically a notice of default is filed after, between 2-4 months of missed mortgage payments and a notice of trustee sale must be given 20 days before the sale date (a sale date is historically set 2-4 months after the notice of default) – but depending on the economic climate it can be extended considerably -
We will now talk about the consequences of a Foreclosure, or what I like to call the Good the Bad and The Ugly. The Foreclosure process can take approximately a year. The good news is homeowners typically don’t make payments during the foreclosure process. The bad news is that following the Foreclosure sale there is a period of 6 months where a deficiency judgment can be claimed. A Deficiency is the amount you owe the bank in excess of what they sold your house for. For example: if you owe $200,000 on your home and the bank sells it (after Foreclosing) for $85,000 – the bank could still come after you to pay the remaining $115,000. The bank only has 6 months after the foreclosure sale to file a lawsuit seeking a deficiency judgment. If a deficiency judgment is claimed within 6 months of the sale date you can either: pay it; risk a lawsuit and judgment for the amount entered against you; or file bankruptcy.
The ugly part of a foreclosure is that during all of this you will have to deal with the disruption and strain on your lifestyle. Mountains of mail and a constantly ringing telephone may not sound like much but when they cause you to miss a credit card payment or electric bill - because you don’t like opening mail anymore– the costs will be undeniable and will obviously add up – The strains these issues can place on family relationships will be covered by Rob Mack in his video series that follows this.
In our next episode I will cover Bankruptcy Protection and Credit Reporting.
I am loan loss mitigation specialist Damian Falcone and this is Get Modified!
See our full set of loss mitigation videos.