Avoid the post-foreclosure nightmare

Thousands of Americans who lost their homes in the housing collapse but have since begun to rebuild their finances are suddenly faced with a new foreclosure nightmare: Debt collectors are after them for money they still have to freeze. their bank accounts and garnishing their wages and confiscation of their assets.

Lawsuits for deficiency

Often times, the proceeds from foreclosure sales are not enough to fully repay the loan, in addition to penalties, legal bills, and other fees. Using a legal tool known as a “deficiency judgment,” lenders can pursue borrowers for any amount that is not covered by the proceeds of the foreclosure sale.

Before the housing crisis, banks often refrained from seeking deficiency judgments because they were expensive and invited bad publicity. But the housing crisis burdened lenders with more than $ 1 trillion in foreclosed loans, causing unprecedented losses. One way that lenders are trying to minimize those losses is by pressuring borrowers to pay for post-foreclosure deficiencies.

Collection

Once a lender obtains a deficiency judgment, they may have years to collect the claim. In Maryland, for example, lenders have up to 27 years to collect. Lenders can also charge post-judgment interest, averaging about 4.75% per year, on the amount of the deficiency, which can put borrowers even more in debt. Collection can be extremely unpleasant, as the laws give lenders aggressive tools to go after borrowers, such as freezing bank accounts, garnishing wages, and confiscating assets.

Borrowers are often surprised to find that they still owe thousands of dollars for homes they haven’t thought about in years. Many of those who went through foreclosure got new jobs, paid off old debts, and sometimes bought new homes. Now, years later, the nightmare of their foreclosure haunts them again.

Avoid foreclosure

In many cases, this nightmare can be avoided. When it comes to foreclosure, a common response is for borrowers to feel overwhelmed and powerless to prevent it. They become victims of their own inaction and needlessly accept the devastating negative consequences of foreclosure. We have all seen and read stories of individual hardship, heartbreaking family struggles, and nationwide economic downturn that have caused unnecessary foreclosures.

Help is available! Don’t accept foreclosure as the end result of your mortgage delinquency. Resources are available at the national, state, and local levels. You can try to get free help, or you can pay for more professional representation. The key is to be proactive, seek available resources, communicate with your bank, and do everything you can to avoid foreclosure. Lenders and government programs offer refinancing options, loan modifications, temporary forbearances, and a host of other mortgage assistance options. If, despite your best efforts, keeping your home is no longer a possibility, you can still avoid foreclosure through a short sale or deed in lieu of foreclosure.

Avoiding foreclosure improves the lives of individuals and families and improves our nation as a whole. By avoiding foreclosure and resolving your mortgage delinquency, you can put foreclosure behind you forever, without worrying about a deficiency judgment down the road. You can save your home and get an affordable and sustainable mortgage. You can immediately begin rebuilding your credit and establishing stress-free personal finances. You can keep living your life and focus on the things that are really important.