House Foreclosed But Still Owing Money to the Lender
When a house gets foreclosed, many consumers fear that they are still owing money to the lender after the foreclosure of their home. In Georgia, it is usually only the second mortgage companies that pursue a deficiency after a house is foreclosed. However, the Wall Street Journal reports that many banks are now pursing deficiency judgments on the first mortgages as well (click here to read the full article).
In the article, the Journal details how mortgage companies are becoming more aggressive in Florida in pursuing these deficiency judgments after foreclosure sales.
I doubt that we will see first mortgage holders start pursuing deficiency judgments in Georgia. Click here to read a blog post I wrote about confirmation of foreclosure in Georgia. In my twelve years as a bankruptcy attorney, I’ve seen it happen only one time. In almost every single case, it is complete waste of time for a mortgage company to chase a consumer who just lost their home in a foreclosure sale.
However, I have seen an increase in cases where a credit union refuses to foreclose on the house. Instead, they sue the consumer on the note. When they are successful in their lawsuit, the credit union will then be able to garnish twenty five percent of the consumer’s net income.
When I saw a consumer go through this type of situation, I advised him to continue living in the house while his wages were being garnished. In his case, getting garnished was much cheaper than the mortgage payment. Also, the amount he was being garnished for was much cheaper than renting an apartment. In his case, the credit union was incredibly stupid by choosing to garnish his wages instead of just foreclosing on the house.
If we see first mortgage holders start to pursue deficiency judgments in Georgia after a foreclosure is completed, I doubt it will last long. In almost every case, the consumer will file for bankruptcy and wipe out the mortgage company. Legal fees for pursing a deficiency judgment against a consumer are expensive. Thus, any mortgage company who chooses to pursue a deficiency judgment will most likely be throwing good money after bad.