Questions on Foreclosure?
Question:
Sounds like you're in a familiar boat with many other Californians :-(
You should seek the advice of a Real Estate Attorney. I'm not familiar with California Foreclosure Laws, but in most states, if there is a deficiency of proceeds after the sale of the home, the Bank can seek to get a judgment against the former homeowner to try to recover the shortfall.
Two things can happen either the bank moves against your other assets to attach to pay for the difference or they can forgive the difference but in that case you will be issued a 1099 on the difference and the IRS will count that as income for the year and you will have to pat taxes on it
You bet they will! They can put a lien on your personal home, cars etc, take you to court and garnish your wages.
There are lots of companies who buy houses before you get to the foreclosure point. You could also consider a short sale. There are also companies who basically work with your lender to get the interest rate down. Believe me, the bank wants their money, they'll work with you before they'll try to foreclose
Unless structured in a separate LLC or Corp, then yes, the bank will come after you and your home.
Do you have 40k in equity on your home to dump into the investment property so you can get it refinanced?
Let this be a lesson, keep investing, but stay away from ARMs. =)
Before choosing to go with the foreclosure, you should look into a few other options first. Refinancing is the option that most homeowners attempt first, but credit/income and tighter lending have precluded most homeowners from qualifying for a loan right now.
Either way, you should list the house on the market just on the off-chance someone wants to purchase it before the foreclosure goes through. You can also try to work with the lender for a short sale, where you'd sell the property for less than what you owe on it. At least it will pay off the loan and save your credit a bit.
If that doesn't work, ask the lender about giving a deed in lieu of foreclosure. That works as just giving the property back to the bank, and they can't go after anything else. They accept the deed instead of foreclosing or paying the loan, so there's nothing else for them to go after. This is only slightly better than a foreclosure, but anything you can do to preserve your credit will help at this point.
It will depend on how the bank pursues the foreclosure if they can sue you for another judgment and go after any other assets. With just the foreclosure, though, they are not entitled to anything else. You pledged the house as collateral for the loan -- not your car, 401(k), or prize racehorse. So all that they can take as payment for the loan is the house.
Look up California's state foreclosure laws and consult your loan documents to determine what kind of foreclosure the bank can proceed with (Judicial or Non-Judicial). That will tell you if they can sue you afterwards and try to go after any other assets.
Banks rarely sue for deficiency judgments, though, since they know that foreclosure victims don't have a lot of extra cash or even the ability to borrow any money. It costs the lender extra time to sue you and there's no guarantee they'd be able to collect on the judgment, so most don't bother with the judgment at all.
Hope that helps.
ForeclosureFish
http://www.foreclosurefish.com/...
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