Problems and Solutions for Underwater Foreclosure Victims
August 7th, 2009
There are problems galore but solutions limited for underwater foreclosure victims. The term ‘underwater’ refers to those borrowers who are unfortunate because the value of their property, with time, has become less than the loan amount. The new government is initiating measures to address this major problem.
But not all those in this soup will qualify for help under the Obama plan. This tempts many borrowers to just walk away from the house. But the lenders might use the long arm of the law to rope them in for running away from unpaid dues. Although the possibility is there, under the present mood of the economy, the lender may not follow up the matter because of the prohibitive cost involved in chasing a financially distressed borrower. John Mechem speaking on behalf of Mortgage Bankers Association said, “You can’t squeeze blood from a stone.” But that does not rule out the possibility of lenders chasing borrowers who have walked away from jumbo loans.
In some states there are specific laws that prevent lenders from chasing borrowers for balance mortgage dues after completion of foreclosure process. Even in these states specifics and details vary from one to another. Arizona and California are two of such states. Thus it is best to discuss with a legal personnel about the status of a borrower in that particular state.
It will be prudent for the lender who wants to be absolutely sure that the lender or servicers will not follow up the matter to settle matters through a lawyer regarding short sale, deed-in-lieu or even foreclosure. Chip Parker is a lawyer and expert in foreclosure related matters, operating in Jacksonville in Florida. He said, “You must get the bank to agree in writing that any deficiency is waived.”
The biggest hurdle for the borrower is to locate someone at the bank who will be of help. Second mortgages complicate matters further.
The tax matter also needs due attention because sometimes debts that are forgiven are considered as income and hence – taxable. Recently there have been changes in the law in this regard. The federal tax burden has been reduced through 2012 on most of the first time buyers of houses who have incurred debts because of loan lenders restructuring or forgiving of loans.
Fall in credit scores have grave consequences for the future whether one rents a house or decides to take a loan to buy one.
- Ohio Is Also Scrambling to Get On to the Foreclosure Rescue Lifeboat
- The foreclosure crisis has led to the Museum of American Finance face an awkward situation
- Non-profit Organizations Spreading Across America to Help Foreclosure Victims
- North Carolina Foreclosure Victims Hungry for Details of Obama Rescue Plan
- More Help Is Coming for Foreclosure Victims from the Treasury
- Foreclosure Victims Are Taking Lenders to Courts
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August 13th, 2009 at 7:48 am
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