On Yahoo today I saw a disturbing story about banks and foreclosures. Apparently banks, who lend you money to buy a house with the house as collateral, are still coming after people after they foreclose on them and have repossessed and sold said house. Mind you, the bank doesn't take your word for how much the house is worth initially. Nope. They have their own appraiser go out and value the property. Then they charge you insurance, PMI, just in case you default prior to getting to the magic 20% of principal level.
Now they are going back after you after they've sold the house for less than the original mortgage. That just doesn't seem right to me. My house is the collateral for the loan. If I can't afford the loan any more, you get the collateral. That's the way collateral works!! If they think the collateral is below the value of the loan, they should come ask for more collateral, at which time I can agree or not.
Some states have anti-deficiency laws, but they don't provide protection for second mortgages or home equity lines, all of which I'm fine with to some degree, though still, they loaned money with collateral as an asset.
In Illinois, if the lender agrees to take the deed in lieu of repayment (actually called a Deed in Lieu of Foreclosure), they may not pursue a deficiency after the sale. That is not the law in every state however!! In some states, even if they say, "Sure, we'll just take the house and sell it. No problem." They can still come after you for the deficiency. Unbelievable.
Subscribe to:
Post Comments (Atom)
2 comments:
oh my, hope everyone reads the fine print!
Agreed.... you gotta read the fine print.
I have absolutely no problem with a homeowner "walking away". After all, it's not a moral promise, it's a business deal.
But you need to know what the business deal is that you signed up for!
Post a Comment