What happens to me as a borrower if I default on my mortgage and the house is worth less than I owe?

Question

I am aware that the bank will foreclose, but I will not be able to pay the difference. How will this work?

Answer 1

Could you get a personal loan and pay over time?
How much is it? can someone help for a share of the future equity?
They will do whatever they can to collect.
If it is because house values fell, and you sell it for less than you owe, they may do a short sale.
Or you can get a bankruptcy

Answer 2

Ouch! This is what's called being upside down on your mortgage.
First, if you haven't already call your mortgage company and see if you can work out a deal to refinance it, lower your rate, or at any rate restructure your payments. The mortgage company would much rather collect some money than none and they do not want to incur the cost of having to foreclose and then trying to sell it.
Second, if they will not negotiate with you you can declare bankruptcy and walk away from it. Of course bankruptcy has changed a bit and the court may decide a payment plan for you. Check with a bankruptcy attorney.

Typically the mortgage company will start sending you notices that they will foreclose. If you do not respond they will start the proceedings. You will eventually be notified to evict the mortgage company will send out an appraiser and they will legally take ownership and possession of the house. Then they will try and sell it to cut their losses.
If the economy and the real estate market has become depressed in your area, they probably will go in the whole on this. So I would contact an agent perhaps the one that sold it to you to see if you can get some info on what has sold similar to your house in the last 6 months. If these sales are all less than what you owe on yours make sure you present this info to the mortgage company when trying to renegotiate your payment.

Now I don't know the details of your particular case but for the most part this is not your fault. Recently mortgage companies have loosened their underwriting standards for loans and made far too many loans over and above what they should have. If anything I would make the argument that you are in this situation due to their lack of stringentness. Talk to an attorney and you may be able to sue.
Good luck!

Answer 3

The bank will, of course, foreclose the property and take ownership from you. Then the house will be sold for as much as possible. Whatever amount the bank loses during such a transaction is called your 'deficiency amount', which also includes the banks's assorted costs in processing and completing the foreclosure process.

The worst that can happen is that the bank will bring suit against you for a legal judgment for the shortfall. The least that will probably occur is they won't sue you for the deficiency, but WILL report it to the IRS on Form 1099 as taxable income, causing you to pay the regular rate of income tax on the deficiency amount. Bankruptcy won't save you from the latter, since the IRS doesn't forgive back taxes owed.

Answer 4

Predatory lending practices, Wall Street misuse of credit default swaps, a housing bubble, lack of adequate oversight, the mortgage industry running amok, careless lending, etc. There have been many books written on the topic. If you haven't learned by now that bad Republican policies nearly crashed our entire economy, you will never learn. That is due to pure stubbornness on your part. Blaming Democrats won't prevent a similar debacle in the future if the lessons from the recent past are ignored and the same policies are followed again. We'll be in the same situation again but, next time, the government may not be able to bail out the financial institutions. Then the whole economy will be irretrievably wrecked.

Answer 5

Neither a borrower nor a lender be
For a loan oft loses both itself and friend
And borrowing dulls the edge of husbandry [thrift]
This above all, to thine own self be true
And it must follow as the night the day,
Thou canst not then be false to any man.
( William Shakespeare, Hamlet, act 1 scene 3. lines 75-8O)

Could not resist that. You will have a ruined credit rating. Pay them around 10% of what they are asking per month and they cannot turn you over to the credit dogs. It seems that you will lose the house but pay them the bare minum payment to keep your credit clean. You do have options. Bankruptsy for one.

Answer 6

Contact the bank right away and talk it out with them,alot are willing to work with you.Be wary of the services offering to stave off foreclosure,many are rip offs.