What is the likelihood that our lender will pursue a deficiency judgment?
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What is the likelihood that our lender will pursue a deficiency judgment?
We took out a 80/15 loan when we purchased our home 5+ years ago. The second is nota HELOC and was used as purchase money only. The house has never been refinanced. My wife and I have since divorced and we want to move on. The house has been on the market for 1.5 years with no offers. We are exploring a foreclosure as neither of us want to keep the house. What is the likelihood the lender garnishes our wages or goes after assets once the foreclosure has run it’s course?
Asked on August 23, 2011 Ohio
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
Most states have laws precluding a deficiency judgment against the property owner under its "anti-deficiency" statutes if the loans that are secured by the property owner's primary residence were acquired when the home was initially purchased and are deemed "purchase money". If such is your situation and the home is later foreclosed upon where the loans are not paid off in full at the auction, most likely you would not be subject to any claims by the lenders for a deficiency balance owed.
Another thought is that if the foreclosure is through a non-judicial forelcosure, some states such as California have laws preventing a deficiency judgment in such a situation even if the secured loans were not purchase money.
Your factual situation sound as though your loans for the home are all purchase money for your primary residence. Assuming Ohio has anti-deficiency laws for such loans, you should not be personally liable for any deficiency assuming the property sells for less than what is owed on the loans.
To be sure, you should consult with an experienced real estate attorney in this area.
Good luck.
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