An experienced foreclosure attorney knows that Orlando homeowners in foreclosure face a deficiency judgment that can plague their finances for up to twenty years. Many homeowners who face foreclosure don’t yet feel ready to consult with a foreclosure lawyer. These homeowners may suffer unnecessarily from the “underwater home” crisis that is a plague to the Orlando community.
An underwater home is one that is worth less than the owner owes the bank. The owner of an underwater home must face the reality of owing the bank more money then they are likely ever to be able to pay. The problem is worse when the homeowner is unable to make payments for more than 90 days and the bank initiates a foreclosure lawsuit to take title to the house. By suing the homeowner for foreclosure, the bank has two goals: (1) get title to the property and (2) get a judgment against the homeowner for the amount of money that was borrowed to buy the house. The bank is hoping to do this quickly, easily and cheaply, without any resistance from foreclosure defense attorneys, who know how to protect homeowner’s rights.
So what are the options if you have fallen behind and your house is worth less than what you paid for it? Should you immediately go into a foreclosure? There are several options.
Don’t leave
The best way is to not try and sell your house for less than what you paid or owe on it. You bought your house for a reason be it the neighborhood, or the schools for example. There is also a chance that if you can hold out long enough the home values in your area will rise.
There could be reason however that you need to sell, a job change that requires you leave the area for example. In such a case, you may have little choice. In the end though if you can hang on, you might have a chance.
Refinancing
While a refi won’t raise the value of your home, and in fact will never allow you to make any sort of profit off an underwater home, a refinance could offer some relief with a lower interest rate and lower payment.
The biggest issue with a refi however is that many lenders will require that you have at least 20 percent equity in your home; something that can’t happen if you are underwater, in which case leaves you with negative equity.
The US government however, can help with a program known as HARP which stands for the Home Affordable Refinance Program. This program gives incentives to lenders to refinance the home loans of owners who owe more on their loans than what their homes are worth. There are some pretty strict requirements for a HARP, but it’s an option worth checking out.
Short Sale
If you have no other options, then you might be able to convince your mortgage holder to allow a short sale. The lender will allow the home to be sold for less than what you owe, with the lender taking the loss; the difference between what you owe and how much you sell the house for. The short sale isn’t easy; the lender must approve all offers, and there are some lenders who won’t even consider a short sale.
In the end, if all other options fail, the homeowner needs to be prepared for a foreclosure.
We respect the homeowner who recognizes that they can no longer afford the mortgage payment on their home, and who then decides that the best way to deal with that situation is to surrender the house to the bank and find somewhere else to live for a lower payment. This is certainly a responsible and ethical approach to what is essentially a financial problem. Unfortunately, banks don’t want to make things easy for the homeowner who wants to “do the right thing.” Banks have one , and only one interest: keeping their balance sheet looking healthy.
They are much less interested in how to resolve the individual cases of homeowners who want to be responsible and who also want to resolve their unfortunate financial predicament. And so, bank’s good balance sheets reports don’t necessarily translate to helping homeowners “do the right thing” by leaving behind an unaffordable mortgage.
When you purchased your home, everyone in the transaction was betting that home values would not only remain stable, but that they would actually increase in value. For those who played for high stakes with investments in real estate, some won, and some lost. But for ordinary people who wanted a nice place to live, we expected a fair agreement that meant we would pay a monthly mortgage payment on a property that would provide us shelter, and long term financial security. Thanks to Wall Street bankers and financial scammers who managed to inflate the real estate market, these assumptions are no longer true. By droves, Orlando homeowners live in houses that are worth less than they owe. Who should pay for this situation? Banks want you to pay.
To be specific, they want you to pay for the rest of your working life for the loans that they supposedly researched, approved, and qualified, before selling them once, twice, and thrice until some Wall Street banker could earn a multi-million dollar Christmas bonus for selling the most securitized mortgages. When this loan obligation is pursued in court, it becomes the deficiency judgment.
Under Florida law, a judgment is effective for up to twenty years. A judgment is recorded in the public records by the bank’s attorneys. It will create a lien on any personal property and real estate that you come to own during the life of the judgment. The deficiency judgment can be used to garnish wages, and seize property that is in excess of what is provided by the Florida law of exemptions.
No Orlando homeowner wants a deficiency judgment. But most of the banks and mortgage servicing companies who foreclose for them are asking for this remedy when they file a mortgage foreclosure lawsuit in Orlando courts. Even if the bank does not obtain the deficiency judgment at the time of foreclosure, it has five years to come back to the court to ask for a judgment be entered against the former homeowner.
Orlando homeowners should not underestimate the effect that a deficiency judgment can have on their financial future. Orlando homeowners facing mortgage default or mortgage foreclosure should be talking to skilled and experienced mortgage foreclosure defense attorneys who can help them deal with the unpleasant prospect of a deficiency judgment. I provide a free consultation to any Orlando homeowner who is interested in learning about how an attorney can help them defend foreclosure.