As if facing a foreclosure wasn’t bad enough, many homeowners also have to worry about whether or not they are liable for their home after the foreclosure process has been completed. Even if you lose your home due to foreclosure you might still be responsible for the difference between the outstanding balance on your loan and the current property value, which is referred to as a deficiency judgment.
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The state of California has some anti-deficiency rules in place to help protect homeowners from personal liability, which all Pasadena foreclosures adhere to these rules. Even though there are rules in place, there is no guarantee that you will be protected. What you will need to do is figure out if the anti-deficiency rules apply to your unique situation, but determining this isn’t going to be easy. Your personal liability is something that should be thought about when you are deciding whether to go allow your house to be foreclosed on or if you want to pursue options.
No matter how hard it is you want to find out for sure because if your lender gets a deficiency judgment against you, by law you will have to pay back that money. If you do not pay it back your lender can choose to have the order enforced, which means garnishing your wages, attaching liens to other property you might own, levying your bank account, or any other legal way that they can to obtain the money that is owed to them.
Situations Where Protections Apply
Trustee’s Sale: In most cases you will be protected from owning any additional money if your lender chooses to foreclose on your home by means of a trustee’s sale. In California, lenders have two options to pursue for foreclosures, a judicial foreclosure and a non-judicial foreclosure. The judicial foreclosure involves a civil lawsuit, which is why most lenders avoid it in California.
Seller Financed Loan: In cases where the seller of the home offered you financing you will not be held responsible for the difference.
Purchase Money Loan: If the loan that your lender is foreclosing is for an owner-occupied dwelling and is less than four units you are most likely protected from any personal liability. If you refinanced the loan you can and often are held liable for the difference.
Pasadena short sale: If you want to go forward with a Pasadena short sale you will need to talk to your lender beforehand to work out a deal where you are not responsible for the difference. When talking to your lender make sure you get it in writing that your lender will accept less than what is owed, but also that you are not personally responsible for the difference.
Situations Where the Rules Don’t Apply
Pasadena short sale: Not all lenders will agree to accept a lesser amount on the amount owed. If your lender doesn’t agree to accept the lesser amount you will be responsible for the difference owed. Even if they do agree and you neglect to get it in writing you will be responsible for the difference owed.
Second Loan: In some cases you will have two loans on your home and the main loan is foreclosed through a trustee’s sale you can still be held liable for the other loan. The other lender can still get a deficiency judgment against you because they have know lost the collateral on the loan due to the Pasadena foreclosure.
Fraudulent Loans: You can be held liable for any amount due on the loans if you are guilty of loan fraud, regardless of the anti-deficiency rules. Loan fraud can include, but is not limited to misstating your income or providing your lender with false information.
Intentional Damage to Property: If you damage or destroy the property on purpose you are responsible for committing bad faith waste. If you commit bad faith waste no matter what other situations apply in regards to the anti-deficiency rules you will be held liable for any difference owed on the property.
VA and FHA Loans: Loans that are secured by the Federal Housing Administration or the Veteran’s Administration are not protected by the anti-deficiency rules, so you will be held liable for the difference. No matter what other situations apply with the loan the federal law overrides California state law, so the rules do not have to be followed.
Image via Wikipedia The state of California has some anti-deficiency rules in place to help protect homeowners from personal liability, which all Pasadena foreclosures adhere to these rules. Even though there are rules in place, there is no guarantee that you will be protected. What you will need to do is figure out if the anti-deficiency rules apply to your unique situation, but determining this isn’t going to be easy. Your personal liability is something that should be thought about when you are deciding whether to go allow your house to be foreclosed on or if you want to pursue options.
No matter how hard it is you want to find out for sure because if your lender gets a deficiency judgment against you, by law you will have to pay back that money. If you do not pay it back your lender can choose to have the order enforced, which means garnishing your wages, attaching liens to other property you might own, levying your bank account, or any other legal way that they can to obtain the money that is owed to them.
Situations Where Protections Apply
Trustee’s Sale: In most cases you will be protected from owning any additional money if your lender chooses to foreclose on your home by means of a trustee’s sale. In California, lenders have two options to pursue for foreclosures, a judicial foreclosure and a non-judicial foreclosure. The judicial foreclosure involves a civil lawsuit, which is why most lenders avoid it in California.
Seller Financed Loan: In cases where the seller of the home offered you financing you will not be held responsible for the difference.
Purchase Money Loan: If the loan that your lender is foreclosing is for an owner-occupied dwelling and is less than four units you are most likely protected from any personal liability. If you refinanced the loan you can and often are held liable for the difference.
Pasadena short sale: If you want to go forward with a Pasadena short sale you will need to talk to your lender beforehand to work out a deal where you are not responsible for the difference. When talking to your lender make sure you get it in writing that your lender will accept less than what is owed, but also that you are not personally responsible for the difference.
Situations Where the Rules Don’t Apply
Pasadena short sale: Not all lenders will agree to accept a lesser amount on the amount owed. If your lender doesn’t agree to accept the lesser amount you will be responsible for the difference owed. Even if they do agree and you neglect to get it in writing you will be responsible for the difference owed.
Second Loan: In some cases you will have two loans on your home and the main loan is foreclosed through a trustee’s sale you can still be held liable for the other loan. The other lender can still get a deficiency judgment against you because they have know lost the collateral on the loan due to the Pasadena foreclosure.
Fraudulent Loans: You can be held liable for any amount due on the loans if you are guilty of loan fraud, regardless of the anti-deficiency rules. Loan fraud can include, but is not limited to misstating your income or providing your lender with false information.
Intentional Damage to Property: If you damage or destroy the property on purpose you are responsible for committing bad faith waste. If you commit bad faith waste no matter what other situations apply in regards to the anti-deficiency rules you will be held liable for any difference owed on the property.
VA and FHA Loans: Loans that are secured by the Federal Housing Administration or the Veteran’s Administration are not protected by the anti-deficiency rules, so you will be held liable for the difference. No matter what other situations apply with the loan the federal law overrides California state law, so the rules do not have to be followed.
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