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Credit Consequences of Foreclosure and Deficiency Judgments

Families facing foreclosure are concerned about being thrown out of their homes. Credit issues and concerns about deficiency judgments are secondary. When a bank initiates a foreclosure proceeding, they file a lis pendens on the property. A lis pendens filing notifies all prospective purchasers that the property is in foreclosure. This has the effect of making the title to the home unmarketable. This means the foreclosure proceeding must be dealt with before the house can be sold.

Late Mortgage Payments

Each time a mortgage payment is paid late, the financial institution notifies credit reporting agencies concerning this late payment. When mortgage payments are not made, credit reporting agents are also provided this information. Each late payment and each non-payment has a negative effect on credit ratings.

Sale of Property

At the end of the foreclosure proceeding the home is sold. Courts usually appoint referees in New York to sell these homes. If the financial institution does not receive enough funds from the foreclosure sale to pay off the mortgage in total, they may enter a deficiency judgment against the homeowner. The deficiency judgment is the portion of the mortgage that was not paid from the proceeds of the foreclosure sale. For example, if your home sells for $200,000 in the foreclosure sale and you owe $250,000 on your mortgage, the bank can enter a judgment against you for the $50,000 deficiency. This is called the deficiency judgment.

Avoiding Deficiency Judgment

There are a variety of ways to avoid deficiency judgments. You can enter into an agreement with the bank to have a short sale. This is when the bank agrees to forgive the balance of the mortgage not covered by the sale. You can also turn your house over to the bank by a deed in lieu of foreclosure, with the bank agreeing to forgive any deficiency from the sale of your home. Should your house be in foreclosure, it is important to consult with a knowledgeable attorney to avoid being subject to a deficiency judgment.

New York Foreclosure Defense

Losing your home in foreclosure is a scary prospect. Having an experienced foreclosure defense lawyer will not only help you in court it will give you piece of mind. Our office litigates foreclosure defense matters on behalf of our clients. We attend foreclosure court conferences. We litigate all types of real estate related issues including, but not limited to, predatory lending, defective foreclosure lawsuits, defective mortgages and bad faith on behalf of financial institutions. We maintain a foreclosure blog to update the general public concerning issues involving foreclosures, mortgage modifications and real estate matters. We also file Chapter 7 and Chapter 13 bankruptcies to deal with foreclosure problems. Call us we can help you!

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The information you obtain at this website is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your particular legal issue. This is attorney advertising.

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