A deficiency judgment allows a lender to pursue your other assets if you choose to default on your mortgage and the property is foreclosed. In Illinois, a loan servicer has recourse to seek money still owed after the property has been sold at auction.
The calculation of the Deficiency Judgment amount is fairly straight forward. If you owe $225,000 on your mortgage but your home sells at auction for only $125,000, you may be at risk for a "deficiency judgment" of $100,000. This means that although the homeowner may have thought that the ordeal of debt ended with the sale of the defaulted property, the lender can pursue the collection of the difference between what you owed on the property at the time of default and the amount for which the property was actually sold.
Yes, and that is why as first step in assessing your risk is to consult the laws for the state where you live (or where your property is located). Specifically, review whether your state is a "recourse state" or a "non-recourse state"? Non-recourse states do not hold borrowers responsible for a home's value if it exceeds the amount the lender was paid at auction. Recourse states, on the other hand, allow lenders to pursue any deficiency, or money you still owed at the time of sale. Monies still owed at the time of the sale is referring to the difference between what the borrower owed at the time when the loan defaulted and what the lender recouped from the auction or sale of the home.
There are several states that have protection laws that prohibit deficiency judgments for most residential mortgages. As of the date this was written, these states include:
There are exceptions, however it is unlikely a homeowner will be responsible for a deficiency judgment if live in one of the states listed above. Of course in any given loan, there may be provisions that should be examined by a lawyer to help ensure your interests are protected. However, aside of any unrelated provisions, lenders in non-recourse states must accept any loss if the sale cannot satisfy the loan amount.
Additionally, non-recourse laws in many of these states (California is one of the more notable examples) only apply to what is referred to as the "purchase money" or home loans actually used for the purchase of your home — and nothing else.
Lenders can and often will pursue Illinois borrowers for deficiency judgments after the foreclosure auction occurs. This is why many homeowners consider it prudent to retain a knowledgeable Illinois lawyer if you are facing foreclosure or decide you want to engage in a strategic mortgage default and walk away from your mortgage.
What can Illinois Foreclosure Lawyer Daniel S. Khwaja do to help families who are about to lose their homes? There are two ways to help, depending on the situation.
1. We can help families get loan modifications and ultimately stay in their homes.
2. We can actively fight the foreclosure, forcing the bank to "prove" the merits of their case.
*Fees listed are in US Dollars ($) and exclude applicable and separate court filings fees, etc. | Flexible payment options available.
Illinois foreclosure attorney Daniel Khwaja wants people facing foreclosure to know they have options. The biggest misconception is that they cannot afford a lawyer; however, Mr. Khwaja offers very affordable rates.
During the FREE initial consultation, he outlines several options including the "Cash for Keys" program, loan modification, and the required "hard proof" lenders MUST have to attempt foreclosing.
Contact Daniel S. Khwaja, Esq. for a free Foreclosure case evaluation.
Daniel S. Khwaja