You have a few common options.
1. You can do nothing. The bank will proceed with its foreclosure action and reclaim the property. This is usually the worst option to take. In some cases, the mortgage company might not make enough on the sale to cover the loan. The bank may have the option to sue the borrower for the deficiency.
2. You can ask the bank to accept the property, and dispense with the foreclosure. In most cases, the bank will not take any further action. This is typically called a “deed in lieu of foreclosure.”
3. You can attempt to sell the property. If you sell it for more than the loan, plus closing costs, you keep the difference. If you sell it for less than the loan, the bank may waive the difference. This is called a “short sale.” In a short sale situation, the borrower should not receive any money from the sale. Also, the borrower may have to pay taxes for the amount of the debt that was forgiven by the short sale.
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#1 by A Grandberry on 18/08/2009 - 8:00 pm
My house was foreclosed on in Dec 2007. We had an 80% and 20% loans at closing with same name. The bank foreclosed on the 1st but not the second. They have sold it once, now bought back operation under a new name. I don’t understand, nor was it explained to us that they could come after us. What are our options?
#2 by David Leon on 16/09/2009 - 11:45 pm
I would have to take a look at your documents to be sure. As a general rule, either mortgage can foreclose. However, if the first forecloses on the second, the second lien is wiped out. This means that the second lienholder’s only recourse is to sue the borrower. The second lienholder can go after the borrower or a co-signer/guarantor. The time limit is four years from the date of the last activity on the loan. Also, the first lienholder can go after the borrower for a deficiency, if the house doesn’t sell for enough at auction to cover the balance due on the note.
#3 by Atikuzzaman Khan on 21/10/2009 - 3:28 pm
Hi,
I am having hard time to make payments. I been borrowing from my relatives for a while, but I cant anymore.
live in Atlanta, GA. Is walking away okay? since I am not interested with my credit anymore. the loan is from one single bank, and I pay something like Mortgage Insurance every month. Can you tell me if it would be recourse type loan or not?
Thanks
#4 by Jessica on 28/10/2009 - 11:45 am
I currently own a home with my ex. I have been trying to get him to buy me out for about 3 years. I no longer live there or have any interest in the property. I just want my name off of the loan. We originally put 20% down and have a loan for $514k and an LOC for $30k. The home is currently worth about $510k-$535k. My ex can’t qualify on his own but his dad was willing to co-sign (at least at one point). Is there anything I can do to get my name off of this loan without it ruining my credit? Currently the loan is in good standing, no payment has been missed or late ever. I just would like my name off of it!
#5 by David Leon on 13/06/2010 - 8:38 am
Unfortunately, the bank granted the loan to the both of you. The bank doesn’t care that you’re no longer a couple. I have yet to see a bank voluntarily release one of the co-borrowers of a loan. If you can get the ex and his parent to refinance the property without you, great. If not, you may be able to force a sale of the house by filing an action to partition. This is an expensive solution, however.
#6 by David Leon on 13/06/2010 - 8:40 am
I would have to read the loan documents to see if the loan is recourse or non-recourse. You should investigate other options such as offering a deed in lieu of foreclosure, or short sale.