Skip to content

Avoid Deficiency – Know your Options

by Dorota Trzeciecka on November 8th, 2011

You had suffered through foreclosure, lost your home, and found an affordable alternative housing.  You thought this was the end of your financial problems. That is, until you received that letter from the bank saying that you’re liable for the deficiency on your foreclosed mortgage.   You read it again and again in disbelief.

That ‘s right — in some states, and Florida is one of them, homeowners are responsible for deficiency after foreclosure. Deficiency is the difference between what you owed on your mortgage and the amount that your home sold for at a foreclosure sale.  You can get rid of the deficiency by paying it, settling with the lender for a lesser amount, or discharging it in bankruptcy.

As you can see, after foreclosure your options to avoid deficiency are more limited.  That’s why, you should avoid foreclosure, if at all possible, and seek any available foreclosure alternatives.  If your home is owned by Fannie Mae or Freddie Mac, or if your loan is serviced by any of the participating Home Affordable Modification Program (HAMP) servicers, you may qualify for short sale or deed in lieu of foreclosure under a government program called Home Affordable Foreclosure Alternatives (HAFA).  The advantage of HAFA short sale is that you will not only avoid painful experience of foreclosure, but you will not be responsible for deficiency after the sale.  If you are found eligible for short sale under HAFA, you will receive a Short Sale Agreement from the servicer.  That Short Sale Agreement has a provision  releasing you from all future liability for any deficiency on your mortgage.  And, you may also qualify for up to $3,000 in relocation expenses.  You must act soon; unless extended by Congress, the HAFA program ends in December of 2012.

From → Uncategorized