Loan Modification

I Lost My House, Can The Bank Still Sue Me?

By Kurt O'Keefe, Detroit Consumer Attorney

In some states, once bank forecloses and gets your house back, you do not owe them any money.

But not everywhere.

Check with an attorney in your state.

In Michigan, we have foreclosure by publication, an auction process, or through a court.

If the mortgage company bids the amount you owe at the foreclosure auction, you owe them nothing.

However, if they bid less, and it is a reasonable market price, you can be sued for the deficiency, that is, the difference between what they bid and what you owe.

Florida is another state that allows mortgage companies to sue after foreclosing.

If the first mortgage holder forecloses in Michigan, and gets the house back, the second mortgage company gets nothing.

The second mortgage company can sue for whatever amount of money is owed.

In judicial foreclosure, the mortgage company sues in court to get the house back.

And, the mortgage company can get

Of course, any suit for money by a mortgage company can be stopped by filing bankruptcy.

What if you have two mortgages, and do a short sale?

Well, as a lawyer, what can I say?   It depends.

The second mortgage company has to sign off for title to the real estate to transfer, that is, for you to sell your house.

But signing off their lien on the house does not mean you do not owe them any money, it just means they do not have your house as security for the loan any more.  You still owe on the note, and they may forgive the loan, or not.

Same with the first mortgage.  They can sign off their lien on the house so the short sale takes place, but that does not automatically mean that you do not owe them any more money.

I Lost My House, Can The Bank Still Sue Me?

Related posts:

1. Short Sales and Bank of America
2. Mortgage Company Sues to Undo Foreclosure Sale
3. Bank Loan Modifications and FDIC Traps For the Unwary

Full post as published by Mortgage Law Network on January 31, 2010 (boomark / email).