If a home goes through a complete foreclosure, the mortgage lender usually auctions the property at a foreclosure sale or some times known as Trustee Sale Auction. Proceeds of this sale is applied to the loan secured by this Real Estate.
With the exception of our market in Silicon Valley where the Winning Bid prices are higher than the Published Bid, Sale price at auction is not sufficient to cover the loans which will create deficiency. For example in Mountain View, California, the Winning Bids in April 2013 have increased more than 108% compared to the same period last year.
In California, lenders generally can not pursue borrowers for deficiency judgement on Purchase Loans used to buy a primary residence. However, deficiency judgement on non-purchase loans can generally be collected like any other unsecured debt.
If you decide your lender to proceed with a Foreclosure, you will likely owe a deficiency balance which could be subject to collections depending on the type of the loan. The most difficult challenge that you might face is that your creditors will have the option to sue you in courts to grant them a judgement to garnish your wages and places levies on your bank accounts and other assets including other homes and personal property.
Due to these unpredictable nature of these collection efforts, we encourage you to work with the creditor to repay the debt. From my experience, most mortgage and home equity lenders are willing to offer flexible repayment terms to borrowers who have defaulted on their loans.
But, if you creditor are unwilling to work with you to establish workable payment terms for the deficiency judgement , you may wish to consider filing for Bankruptcy protection. We strongly encourage you to consult with a qualified Bankruptcy attorney prior to filing will impact your credit history for at least 7 years and beyond.
Another option to Avoid Foreclosure is a Short Sale which will provide more reasonable avenue and medium to negotiate with your lenders. We would recommend for you to review our Foreclosure Filing reports that we have published for each city to find out how long it’s taking for the lenders to foreclose in your city.
Finally, we strongly urge you to contact US Department of Housing and Urban Development to get a Counselor assigned to you to explore ALL your option to Avoid Foreclosures. We would advise you to request a Home Value Request to find if your home can NOT be sold to satisfy ALL the loans.