If you foreclose on your home, will the bank go after your other assets?

Answer 1

As is so often the case, even in California the answer to this question is "it depends."

California foreclosure rules don't allow defficiency judgements on purchase money loans. This means if the money you borrowed was to buy the property, then the lender can not sue you for a "defficiency" between what they collect in foreclosure and what you owe them... IF the loan was "purchase money".

So what is a "purchase money" loan? It's money used to buy or to refinance the house. By now you should be asking, "what if I took out extra money to buy a car or go on vacation?" Good question. That is not purchase money, and the bank could go bring suit against you for it.

Guess what else? All this applies only if the bank chooses to follow the standard "non judicial" California foreclosure process. However, banks can choose to pursue foreclosure in court. So why might a bank pursue judicial foreclosure?

Many people are in foreclosure because they borrowed equity from "house A" to buy "house B" and "House C" as investment property. Now the payments have adjusted upward and they can't afford the loan. What happens? The borrower chooses just to "walk away" from one of the properties, but they still have equity in one or the other property. The bank could say "that's not fair!" and sue in court.

Okay, so what's the likelihood of a bank pursuing judicial foreclosure on a non-judicial state, or going after your other assets in court? Pretty slim, really. It's costly to sue and they just want the problem to go away, just like you.

So unless you have some outrageous situation where you obviously have plenty of assets to pay your mortgage but just don't want to, then you probably don't have to worry.

Answer 2

That depends on where you live. If the property is located in California and if the loan was used to purchase the property for use as your principal residence all the lender can do is take the property. If the loan was not purchase money, such as a line of credit or a refinance, or was secured by another type of property the lender could potentially get a deficiency judgment and go after other assets. But if the lender forecloses through a trustee sale rather than going to court then no deficiency judgment is available. Almost all foreclosures in California occur using the trustee sale process so deficiency judgments rarely occur.

Answer 3

Borrower's Obligations

Mortgagor is required to pay for mortgage insurance, or PMI, for as long as the principal of his primary mortgage is above 80% of the value of his property. In most situations, insurance requirements are sufficient to guarantee that the lender will get all his money back, either from foreclosure auction proceeds or from PMI.

Nevertheless, in an illiquid real estate market or following a significant drop in real estate prices, it may happen that the property being foreclosed is sold for less than the remaining balance on the primary mortgage loan, and there's no insurance to cover the loss. In this case, the court overseeing the foreclosure process may enter a deficiency judgment against the mortgagor. Deficiency judgment is a lien that obligates the mortgagor to repay the difference. It gives lender a legal right to collect the remainder of debt out of mortgagor's other assets (if any).

There are exceptions to this rule, however. If the mortgage is a non-recourse debt (which is often the case with residential mortgages), lender may not go after borrower's assets to recoup his losses. Lender's ability to pursue deficiency judgment may be restricted by state laws. In California and some other states, original mortgages (the ones taken out at the time of purchase) are typically non-recourse loans, however, refinanced loans and home equity lines of credit aren't.

If the lender chooses not to pursue deficiency judgment—or can't because the mortgage is non-recourse—and writes off the loss, the borrower may have to pay income taxes on the unrepaid amount.

Any other loans taken out against the property being foreclosed (second mortgages, HELOCs) are "wiped out" by foreclosure (in the sense that they are no longer attached to the property), but borrower is still obligated to pay them off if they are not paid out of foreclosure auction's proceeds.

Answer 4

First of all, you don't forclose on your home, the mortgagor or trustee does. They can only collect on the value of the house as determined by a sale "at the courthouse door". If it is more than the mortgage due and legal fees, you will get the remainder (dont hold your breath on this). If it is not, the bank can't take any other action than getting a judgement for the balance and having that appended to your credit report. Of course, after having a foreclosure on your report, that is just an afterthought.

Answer 5

It would depend on what other assets you have.
If you have gone into forclosure you are still responsable for the payments, until you sign a quit claim on the property or sell to another person relinquishing your responsability.
You should call and talk to an attorney to get the correct answers for your State or country that you live in. Each state has different guidelines on these matters.

Answer 6

NO that is the bottom line. If they think there was fraud on your loan or you were a first payment default, then they would go after you. With all the foreclosures coming in the next few years, they will just ruin your credit.

Answer 7

Yes, for the amount of the difference between what the property can be sold for and what is currently due. DO NOT FORGET THE LAWYERS. THE BANKS LAWYERS CHARGE ENORMOUS FEES FOR THIS FINAL ACT OF KINDNESS.

Answer 8

No, they will write you out of the abstract to avoid clouding the title. It will appear that you never bought the house. I knew a man who lived on this. He'd buy a house and live in it until they kicked him out. Then, he'd go buy another one. He never got gigged, nor a black mark on his credit.
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KrazyKyngeKorny(Krazy, not stupid)
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