What to do if house is upside down?

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What to do if house is upside down?

House has Final Decree for foreclosure. Loan sold to new servicer. What is status of foreclosure now? Sale date was cancelled but not final decree. Have been trying to work modification with lender and have been paying mortgage for the last 16 months based on verbal modification discussion. All paperwork submitted butno response from lender. Loan now sold to new servicer who says I must start loan modification process over with them. House is upside down. Is it better to try a short sale or walk away? Can I still do Deed In Lieu of Foreclosure? My husband’s name is also on foreclosure papers but not on mortgage. Can he apply for new mortgage to buy another property?

Asked on August 20, 2010 under Real Estate Law, Florida

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

1) If you walk away from an upside-down mortgage, the lender would have the right to sue you for the deficiency--i.e. to sue you for any amount still owed on the mortgage after the house is sold by the lender and the proceeds applied to the mortgage. They might not choose to do this (it may not be worth it to them), but in FL they have the right.

2) A short sale without lender approval (i.e. without the lender agreeing to accept the short sale proceeds as payment in full of the loan) leaves you in much the same circumstance as above--potentially liable for a deficiency.

3) You can offer a deed in lieu of foreclosure; the lender does not have to accept it.

4) Your husband cann apply for a new mortgage. However, if he is on the foreclosure papers, and if you are on the original mortgage, there's a good chance that either his foreclosure or your mortgage delinquency will show up and affect the odds of getting the loan--or if you get it, you may have to pay more in interest, put more money down, and/or be qualified for less.


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