Common misconceptions about mortgages
Numerous clients have told me that the trained bouncers who work in the bank’s collections department would threaten them that they would come after them personally if they didn’t pay and garnish checking accounts and other nonsense. The crux of the matter is the only guarantee that the bank has, in almost all cases, since the mortgage is the physical property itself. In other words, if they are forced to foreclose, their only recourse against you, the borrower, is to repossess the property and resell it to recover the outstanding mortgage balance and hopefully attorney fees as well. They can’t put you in jail or garnish your wages. They can only look at the property as collateral for the loan balance.
If the loan was obtained through fraudulent means, for example an inflated appraisal or if you, the borrower, lied on the loan application, then the appraiser could be in trouble and you could be subject to some questions, if not legal actions. I have seen cases where both the mortgage broker and appraiser worked together to inflate values and misreport income to get loans approved. Just know who you’re dealing with.
The vast majority of mortgage loans do not carry a personal guarantee by the borrower to pay. As stated above, the only collateral or recourse the bank has is the property. They will try to intimidate people by claiming that they have the right to go after other assets, but in reality they can only take back the house. If the property is foreclosed on and they are forced to resell it, you may be prosecuted for what is called a deficiency judgment. The judgment is for the difference between what was owed, including attorneys’ fees, less the price they were able to sell the property for. (*See the end of this chapter for an update on this topic and how it may affect you.) I have found that many banks don’t do this for the simple reason that it takes too much time and energy to keep records and they just write off losses. Even when we have negotiated short sale payments for homeowners, we have insisted that they give up their right to a deficiency judgment as part of the contract and have agreed. The bottom line is that it is not set in stone and, as things currently stand, is rarely enforced. That doesn’t mean you shouldn’t protect yourself and prevent it from becoming a problem.
Another common misconception regarding foreclosures is that when you receive the foreclosure notice, you should begin to vacate the property. The legal term is notice of lis pendens; this is just to indicate that the bank intends to take legal action to foreclose on the mortgage. You continue to have ownership rights to the home until the property is sold on the courthouse steps, and in most states we’re talking months, not weeks. You will then have a certain amount of time to vacate and this time frame varies from state to state.
Since this update was written in early 2009, there have been many changes in timelines. What has happened is that the sheer volume of foreclosures that must be processed through the civil court system is slowing the process down to a crawl. What used to take a few months to move through the courts is now taking four to six months. I’ve talked to people who are up to eight months behind on their mortgages and still haven’t received their court default notices stating that their lender has started a foreclosure action.
At any time during this legal process, you have the right to cure the default and bring the loan current. In effect, by bringing the loan current, allowing you to restore the loan to current status in the eyes of the bank. I’ve heard stories of people at the bank telling customers that they will be physically dragged out of their home if they don’t pay by a certain date and that if they don’t pay a certain amount by a certain time they won’t have the right to reinstate the loan at some point. place later. These comments are simply not true and are used in an effort to intimidate.
My final suggestion on this subject is that you take the time to find the reinstatement wording in your mortgage document and know your rights. Since each mortgage document has subtle differences, it would be difficult to say that everyone is treated the same. Find it and review it, you have the right to update it no matter how outdated it is. When it comes to time, you can wait until the day the foreclosure will take place on the courthouse steps and if you have the full amount available to pay back payments, late fees, attorney fees and other junk fees added by the bank, you can stop the foreclosure and reinstate the loan. I don’t suggest cutting it that close though, it’s better to be safe than sorry. Know your rights; You have more options than you think.