In my latest dispatch from the debtor’s revolt, we’ll look at how walking away from a mortgage can lead to more nightmares for underwater homeowners.
From Bloomberg: Lenders Pursue Mortgage Payoffs Long After Homeowners Default
When John King stopped making payments on his home in Coral Gables, Florida, two years ago, he assumed the foreclosure ended his mortgage contract, he said. Last month, a Miami-Dade County court gave collectors permission to pursue him for $44,000 stemming from the default.
King is among a rising number of borrowers who are learning that they can be on the hook for years after losing their homes.
In states such as Florida, courts give mortgage holders as long as five years to seek a deficiency judgment and, if granted, up to 20 years to collect. Usually, they have the option of renewing the judgment if it’s not paid off within 20 years.
And here’s another story, this one from CNN …
You lost your house - but you still have to pay
In the case of foreclosure, lenders can pursue deficiencies in more than 30 states, including Florida, New York and Texas, according to the U.S. Foreclosure Network, an organization of mortgage law firms.
Some states, such as California, are “non-recourse” and don’t allow deficiency judgments. But, even there, if the original loan was refinanced, some or all of it may be subject to claims.
This problem is only going to get worse. American homes have lost a whopping $6.4 trillion (28%) from the value of U.S. residential real estate since the 2006 peak. About 21% of American homeowners owe more on their mortgages than their properties are worth, according to Zillow.com, and that percentage is rising. According to the New York Times, the number of Americans who owe more than their homes are now projected to climb to a peak of 5.1 million by June — about 10%of all Americans with mortgages.
Here are three things to take away from this:
1. If you’re thinking of defaulting on a mortgage, learn the laws in your state. Here is a LIST of non-recourse mortgage states and non-deficiency statutes.
2. Even if you’re in a “non-recourse” state, consult with both a lawyer and CPA before defaulting on your debts
3. Learn EXACTLY what the consequences are of any action you take.
When Banksters Attack: "Soon, the rebellion will crushed!"
Related Posts
- The Snowballing Crisis of Debt (03/03/08)
- Holy Dollar Doom, Batman! Moody Says US Risks Losing AAA Debt Rating! (10/22/09)
- Wages Fall as the Battle for Exports Heats Up – Sovereign Debt Default Risk Rises (03/08/10)
- Happy $10 Trillion National Debt Day! (09/30/08)
- More Bad News for Mortgage Lenders (11/30/09)
{ 1 trackback }
{ 3 comments… read them below or add one }
In my opinion if people have some income they should pay towards their debts. It may only be a small amount but it should be paid.
Should we convert all our money to gold and silver? This is money not an investment.The government has to default on debt or devalue the dollar.Period. Even if bonds crash and yields rise you would get a devalued dollar and/or a defaulted payment whereas gold and silver is always money. Why hold anything else ?
Thanks
Well, the non-recourse states will not help those who can move house but not move THE house
. Plus, from an economists’s perspective, non-recourse states will, all other things being equal, have higher mortgage premiums to reflect the greater risk (haven’t been able to dig up research on that question yet). After all, that’s a moral hazard, esp. if you had a no-money-down mortgage: prices go up - you win, prices go below remaining mortgage debt (and are unlikely to recover) - the bank looses (of course, if up to then homeowners had paid higher monthly instalments on their mortgage than if they had rented instead that would still not be a bargain, but such is the nature of speculation). The thing is, though, that there will be so many more defaults of people already bled white in the next two years that banks “striking back”, if they’re not themselves already in receivership bythen, will incur higher costs in litigation than if they leave most of those debtors alone. And, after all, the banks were the biggest speculators when they offered mortgages to peiople whom they knew or had to assume couldn’t pay the rates after a reset unless interest fell to unannturally -and unsustainably- low levels; reckkless speculation again.