All Foreclosure Re: rights of second lien holder

Posted by Julio Martinez-Clark on March 21, 2008 at 09:54:28: In Reply to: rights of second lien holder
Posted by csachs on March 21, 2008 at 08:48:42: csachs,

Your question is very common, and I wrote and article that explains the
issue in detail; its titled "Homeowners’ Dilemma: To be or not to be in
Foreclosure." The following is an excerpt from the article in my blog:

"In regards to a mortgage deficiency judgment, it depends on your state
laws. Generally, if your first mortgage/lien holder forecloses on the
property, it isn't that common to see that the first purses deficiency
judgments because it's usually the larger loan, and its goal with the
foreclosure is to take the property and then sell it and get their money
back (or most of it); again, it depends on your state laws and the
disposition of the 1st to pursue a deficiency judgment. In the case of a
second lien/mortgage holder, under current market conditions, it could
very well be wiped out at the sale (nobody bids in your home and the
1st will take it back) and then in order to make you pay, it will try to
harass you (phone calls, letters) and perhaps sue you to get a judgment
against you that can be enforced by garnishing your wages, bank
accounts, other personal and real property that you may own, and
seizing and selling your assets to satisfy the debt. Many homeowners
are concerned about personal liability from mortgage foreclosure
deficiency judgments. Although they accept loss of equity, if any, in
property which is foreclosed by their mortgage lender, people are afraid
of a deficiency judgment."

..."During the recent real estate boom deficiency judgments were
uncommon because increasing real estate values brought home values
above note balances of defaulting mortgages. Additionally, lenders
could take back "upside down" properties and hold them until the rising
market made them whole. In the current real estate recession, more
lenders may pursue deficiency judgments. Even in a weak market, if
there is still equity in your property when you relinquish the property
through foreclosure you can defend a motion for deficiency judgment."

..."You can't go to jail for failing to pay a debt or a judgment. If you do
not pay a debt or if a judgment is entered against you, this information
can be reported to the credit bureau and made a part of your credit
history. The credit bureau can report this information for seven years in
your credit history. If a judgment is entered against you, you are called
a judgment debtor. A judgment is an order entered by a judge at the
end of a lawsuit. A creditor who obtains a judgment against you is
called a judgment creditor. A judgment creditor can require you to
attend a deposition and give information about your income and assets.
The court can require you to give written information or testimony
about your income, assets, property, employer and Social Security
number. If a judgment is entered against you by a court, your wages or
bank account may be taken from you to pay the judgment. This is called
garnishment and attachment. The garnishment law allows the judgment
creditor to obtain a continuing writ of garnishment which orders your
employer to deduct money from your periodic wages until you have
paid off the judgment. Through a process called execution a creditor
can collect money owed under a judgment. The judgment creditor pays
a bond to the local sheriff to seize personal property owned by a
judgment debtor so that it can be auctioned and the proceeds applied
to pay the judgment."

Julio Martinez-Clark

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